Economic Outline

Economic Indicators

Despite implementing substantial economic and structural reforms aimed at sustaining growth, Malawi remains one of the world’s poorest countries. Its economy is heavily reliant on agriculture, which provides employment for two-thirds of the population, making it highly vulnerable to external shocks, especially those related to climate. Over the past three years, per capita income has declined as economic growth has consistently lagged behind population growth. Frequent climatic disasters and other external shocks have deepened the country’s challenges, limiting the ability of poor households to build resilience. In 2023, real GDP grew by just 1.6% year-on-year, constrained by limited access to inputs due to foreign exchange shortages and the effects of Tropical Cyclone Freddy. In 2024, the economy continued to face serious difficulties, with real GDP growth slowing to 1.8% amid a severe drought and persistent foreign exchange constraints. Real GDP is projected to grow modestly by 2% in 2025, supported by a partial recovery in the agricultural sector. However, growth in the industrial and services sectors is expected to remain subdued due to ongoing foreign exchange shortages, which continue to limit the import of production inputs. In 2026, GDP growth is forecast at 2.4% (World Bank).

Government expenditure consistently outpaced revenue growth, leading to a rising fiscal deficit in recent years. Fiscal revenues rose by 0.6 percentage points to 16.8% of GDP in 2023, supported by strong tax revenue performance and increased grant disbursements from development partners. Despite this, Malawi recorded the highest fiscal deficit in sub-Saharan Africa at 10.2% of GDP, driven by fiscal slippages and the recapitalisation of the Reserve Bank of Malawi to offset exchange rate losses. After narrowing to 7.7% in 2024, the fiscal deficit is projected to widen again to 8.7% of GDP in 2025, largely due to increased election-related spending and the need to cover critical expenditures previously funded by the United States. After increasing in recent years, public debt declined to an estimated 84.5% in 2024, from 91.3% one year earlier. Nevertheless, according to Coface, Malawi is in default with its external bilateral creditors, mainly India and China, as well as commercial lenders like the Trade & Development Bank and Afreximbank. It requires USD 986 million in debt relief by 2027—about 7% of GDP. While bilateral restructuring commitments have been secured and talks with commercial creditors are ongoing, over 60% of Malawi’s external debt is multilateral and not subject to restructuring. According to official figures, Malawi’s average annual inflation rate reached 32.2% in 2024, up from 28.8% in 2023. In the short term, inflation is expected to ease only slightly due to a weak agricultural recovery, new import bans limiting supply, and continued high money supply growth.

The World Bank estimated the unemployment rate at 5% in 2024, but the vast majority of earners in Malawi participate in the informal economy. Moreover, the combination of external imbalances, high inflation, and fiscal constraints has deepened economic vulnerabilities and hindered recovery, with the poverty rate rising to 71.2% in 2024. The country has one of the lowest GDP per capita (PPP) in the world, estimated at USD 1,713 in 2024 (IMF). Other challenges include addressing scarce skilled human resources, providing healthcare, and managing population growth.

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