Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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 (Coface). After slowing down to 0.9% in 2020, GDP growth picked up to 2.2% in 2021, helped by a good harvest, and it is expected to further accelerate to 3.5% in 2022 and 4.5% in 2023 (IMF). Agricultural production and public investments will be the main drivers of growth (Coface).

Malawi's financial situation deteriorated due to the Covid-19 pandemic, as balance of payment and fiscal needs increased in the midst of declining revenues. In response to the health crisis, the authorities adopted measures including strengthening the health care system, stepping up social spending, ensuring food security, and easing liquidity constraints in the banking system (IMF). Economic activity started to recover in 2021, but public finances worsened. Public deficit (including grants) increased from -6.6% GDP in 2020 to -7.4% GDP in 2021, and is expected to widen to -10.4% GDP in 2022 before decreasing to -9.5% GDP in 2023 (IMF). Investments under the Malawi III growth and development strategy, as well as agricultural subsidies, will weigh on expenditures (Coface). Public debt continued to increase, from 54.7% GDP in 2020 to 59.3% GDP in 2021, and is expected to soar to 65.4% GDP in 2022 and 69.5% GDP in 2023 (IMF). Malawi’s large current account deficit is putting pressure on foreign exchange reserves, which represent less than six weeks of imports, leaving the economy vulnerable to shocks (Coface). The IMF expressed concerns over Malawi’s high risk of overall and external public debt distress. The depreciation of the Malawian kwacha (more than 6% in 2021) and increases in prices for fuel, fertilizers, and food pushed inflation up to 9.5% in 2021 (IMF). It is expected to remain high in 2022 (9%) and to decline to 6.9% in 2023 (IMF). The government's priority, outlined in the Covid-19 Socio-Economic Recovery Plan 2021-2023, is to support economic recovery while preserving macroeconomic stability. In the long term, President Chakwera’s Malawi Vision 2063 aims for the country to reach upper-middle income status by 2063 by investing in physical and human capital (IMF). Malawi has expressed its interest in a new Extended Credit Facility arrangement with the IMF, but progress towards an arrangement depend on strong commitment to an adjustment program as well as sizeable financing support from the international community and regional development banks (IMF).

In Malawi, poverty has been increasing in rural areas where 85% of the population lives, compared to urban areas where it fell significantly from 25% to 17%. Unemployment was around 6% in 2020 (World Bank). Other challenges include addressing scarce skilled human resources, providing healthcare, and managing population growth. The country has made progress in combating AIDS, although 10% of the population is HIV-positive.

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