Malawi flag Malawi: Economic and Political Overview

The economic context of Malawi

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.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 12.5213.1311.2411.3311.70
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 567578481471473
General Government Gross Debt (in % of GDP) 75.881.374.974.673.2
Inflation Rate (%) 20.830.327.914.78.1
Current Account (billions USD) -0.40-0.91-0.80-1.06-0.91
Current Account (in % of GDP) -3.2-6.9-7.1-9.4-7.8

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

With about 80% of the population living in rural areas, the economy of Malawi is predominantly agricultural: the primary sector is estimated to account for 21.8% GDP, 80% of export revenues, and 62% of employment (World Bank, latest data available). The main export and most cultivated crop is tobacco, while other revenue-generating crops include corn (maize), tea, coffee, sugarcane, cotton, sorghum, and potatoes. Historically, the country produces enough food to feed its population, though harvests can be seriously affected by adverse weather conditions, as was the case in 2015 and 2016 with El Niño-induced droughts. According to data from FAO, total production is estimated to be approximately 3.8 million tonnes, marking a 3% decrease from the previous five-year average. Within this volume, maize production constitutes the largest portion, estimated at a below-average level of 3.5 million tonnes in 2023. The reduced maize output is mainly attributed to decreased yields, compounded by localized crop losses and damage in southern districts resulting from flooding triggered by Cyclone Freddy in March.

Though still underdeveloped, the industrial sector contributes an estimated 18.3% of GDP, employing a mere 8% of the workforce. The majority of Malawi's industrial activity comes from manufacturing and food processing. Despite the government’s efforts to boost competitiveness, several challenges keep hindering the sector, including a poor business climate, a lack of well-developed infrastructure, and a shortage of skilled labor to operate machinery. Mining activities are at a small-scale level, as Malawi has no oil or precious metals (except for ruby). However, the country has some deposits of bauxite, asbestos, graphite, and uranium. According to data from the National Statistical Office (NSO), Malawi's industrial production, measured by the volume of output from industrial sectors, saw an average year-on-year increase of 8.8% in 2022. However, despite this growth, the overall industrial output across all sectors within the manufacturing sector declined, except for the manufacturing of tobacco (+72.9%), rubber, and plastic products (+7.8%).

The services sector is the major contributor to the economy, accounting for more than half of GDP (54.9%) and 30% of employment. The main activities include tourism, health services, the banking sector, telecommunications, and retail, with the government of Malawi holding significant shares in most of these sectors. Tourism is considered a priority economic sector in the country’s long-term development plan “Malawi Vision 2063”: prior to the COVID-19 pandemic, the sector accounted for more than 525,000 jobs, representing almost 7% of overall employment. After plummeting due to the pandemic, in 2022, the direct contribution of travel & tourism to GDP amounted to MWK 164.2 billion, accounting for 1.9% of GDP (data World travel & Tourism Council). Malawi's banking sector, overseen by the Reserve Bank of Malawi (RBM), is generally stable. However, only 25% of the adult population utilizes banking services. The sector comprises eight commercial banks, with the National Bank of Malawi and Standard Bank of Malawi dominating, holding a combined market share of 46% for total assets and 47% for total deposits. They also represent 56% of total loans and 58% of total equity capital (U.S. Trade Administration).

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 61.9 8.1 30.0
Value Added (in % of GDP) 21.8 18.3 54.9
Value Added (Annual % Change) -1.0 0.9 1.8

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Country Risk

See the country risk analysis provided by Coface.

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Sources of General Economic Information

List of Malawi's Ministries
Statistical Office
National Statistical Office of Malawi
Central Bank
Reserve Bank of Malawi
Stock Exchange
Malawi Stock Exchange
Economic Portals

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Latest Update: May 2024