Economic Outline

Economic Indicators

Compared to other countries, Malawi's economy proved to be resilient to the Covid-19 crisis, mainly thanks to the dominant role played by the agricultural sector. Nevertheless, after a tepid rebound in 2021, Malawi’s economy entered another slowdown in 2022, when GDP grew an estimated 0.9% due to external shocks (particularly the global impacts of the Russia-Ukraine war) and a worsening balance-of-payments crisis caused by sustained fiscal and external imbalances. The country implemented significant measures to stabilize its economy; however, 2023 posed considerable economic hurdles with GDP growth reaching only 1.6% (World Bank). The restart of energy production at the Kapichira Hydroelectric Power Plant enhanced electricity accessibility, bolstering industry and services sectors. Nonetheless, scarcity of production inputs persisted across sectors due to foreign exchange shortages, dampening overall growth. The IMF expects economic growth to pick up to 3.3% this year and 3.8% in 2025.

Government expenditure consistently outpaced revenue growth, leading to a rising fiscal deficit, surpassing 10% of GDP in FY2022/23. Meeting financing needs became challenging, particularly in FY2023/24, with domestic market resources falling short. However, net borrowing is projected to moderate in FY2023/24 as part of the government's fiscal reform efforts. It's expected to reach 7.4% of GDP, an improvement from 10.4% in FY2022/23, marking the first decline in six years. This improvement is supported by a slight decrease in expenditure and a revenue increase of 2.4% of GDP. Tax revenue is projected to rise to 12.7% of GDP, driven by enhanced collection in various categories. The 44% kwacha adjustment is anticipated to benefit international trade and transaction taxes. With expected budget support and exchange rate gains, grants disbursement is forecasted to exceed the approved target, reaching 3.7% of GDP. Other revenue is also anticipated to improve, reaching 1.2% of GDP from an approved target of 0.7%. The public and publicly guaranteed debt stock continues to grow, fueled by higher utilization of both domestic and external borrowing. Public debt is estimated to have risen from 75.7% of GDP in 2022 to 81.3% in 2023. Increasing fiscal deficits and reliance on costly domestic borrowing have driven up domestic debt, climbing from 30% of GDP in 2021 to 42% in 2023 (data World Bank). In November 2023, financing assurances were secured from China and India, which will aid in the debt restructuring process. Following a prior decline, the 44% adjustment of the kwacha in November 2023 heightened inflationary pressures, driven by price hikes for commodities bought at the official rate. Consequently, food inflation surged, reaching a peak of 43.5% in December 2023.

While no reliable figures are available for the unemployment rate, poverty has been increasing in rural areas where 85% of the population lives, compared to urban areas where it fell significantly in the last decade. However, in 2023, an estimated 71.7% of the population were living below the international poverty line (World Bank). The country has one of the lowest GDP per capita (PPP) in the world, estimated at USD 1,732 in 2022 (World Bank). Other challenges include addressing scarce skilled human resources, providing healthcare, and managing population growth.

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