Economic and Political Overview

flag Malawi Malawi: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

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.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 11.03e11.85e12.1512.0111.83
GDP (Constant Prices, Annual % Change) 5.4e0.92.23.04.5
GDP per Capita (USD) 544e568e566544521
General Government Gross Debt (in % of GDP) 45.354.759.365.469.5
Inflation Rate (%) 9.48.69.59.06.9
Current Account (billions USD) -1.31-1.68-1.92-1.82-1.79
Current Account (in % of GDP) -11.9-14.2-15.8-15.1-15.1

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Main Sectors of Industry

With about 80% of the population living in rural areas, the economy of Malawi is predominately agricultural: in 2020, the sector accounted for 22.7% of GDP, 80% of export revenues and 76% of employment (World Bank). The main export and most cultivated crop is tobacco - this, in a context where the country is looking to diversify its economy. Aside from tobacco, other revenue-generating crops include tea, coffee, sugarcane, cotton, sorghum, potatoes and corn (maize). Historically, the country produces enough food to feed its population, though harvests can be seriously affected by adverse weather conditions, like it was the case in 2015 and 2016 with El Nino-induced droughts.

Though still underdeveloped, the industrial sector contributed an estimated 18.5% of GDP in 2020. The majority of Malawi's industrial activity comes from manufacturing and food processing. Despite the government’s efforts to boost competitiveness, several challenges kept hindering the sector, including poor business climate, a lack of well-developed infrastructure, and the lack of skilled labour to operate machinery. Mining activities are at a small-scale level, since Malawi has no precious metals or oil (except for ruby). However, the country has some deposits of bauxite, asbestos, graphite, and uranium. The industrial sector only employs 5% of the workforce.

The services sector is the major contributor to the country’s GDP (52.6% in 2020). 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. The sector employs 18% of the workforce. In 2020, due to the COVID-19 pandemic, the service sector collapsed, declining by 6% (Coface). The agricultural sector proved more resilient, expanding by 0.5%, but was nonetheless hurt by lower cotton prices, supply chain disruptions and the decline in tobacco prices and production (Coface). In 2021, the recovery was driven by a rebound in agricultural production.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 76.4 5.4 18.3
Value Added (in % of GDP) 21.1 17.2 55.6
Value Added (Annual % Change) 3.0 1.2 -0.3

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Malawi Kwacha (MWK) - Average Annual Exchange Rate For 1 MUR 20.0821.1821.5821.0119.05

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

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.

Score:
53/100
World Rank:
145
Regional Rank:
33

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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Foreign Trade in Figures

Malawi is relatively open to international trade, which represents 66.6% of the country’s GDP (World Bank). The country is a member of the WTO and has bilateral trade agreements with two of its main trade partners, South Africa and Zimbabwe. Malawi is also a beneficiary of the African Growth and Opportunity Act (AGOA), a U.S. trade preference program. As part of its trade policy, the country has been gradually reducing protections granted to domestic trade by shifting its sources of revenue from customs duties to consumption and direct taxes. The average applied tariff rate is 4.2%. Malawi mainly exports raw tobacco (52.5% of total exports), sugar, tea, leguminous, nuts and machinery. Imports are led by refined petroleum (7.2% of total imports), fertilizers, medicines, tobacco and vehicles.

The main export destinations of Malawi in 2020 were Belgium, South Africa, the United Kingdom, Kenya, the United States, Zimbabwe, China and Tanzania. The top import origins were South Africa, China, the United Arab Emirates, India, the United Kingdom and Zambia. (Comtrade).

Malawi’s trade balance is structurally in deficit. In 2019, trade deficit (including services) reached USD 2.03 billion. In 2020, imports of goods reached USD 2.82 billion, while the country exported goods for a value of USD 767 million. The export of services generated USD 162 million while the import of services bill amounted to USD 275 million (WTO). In 2022, the trade deficit is expected to narrow only marginally, as increased agricultural exports will be partly offset by rising imports and the depreciation of the Malawian kwacha (Coface).

 
Foreign Trade Indicators 20162017201820192020
Imports of Goods (million USD) 2,4252,5472,7062,9412,820
Exports of Goods (million USD) 1,017884880913767
Imports of Services (million USD) 245301302337275
Exports of Services (million USD) 94130160175162
Trade Balance (million USD) -1,090-1,577-1,658-1,857n/a
Trade Balance (Including Service) (million USD) -1,225-1,728-1,812-2,033n/a

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2020
Belgium 20.8%
South Africa 6.2%
United Kingdom 6.0%
Kenya 5.1%
United States 4.6%
See More Countries 57.3%
Main Suppliers
(% of Imports)
2020
South Africa 20.6%
China 16.2%
United Arab Emirates 10.1%
India 7.7%
United Kingdom 4.6%
See More Countries 40.9%

Source: Comtrade, Latest Available Data

 
 

Main Products

0.8 bn USD of products exported in 2020
Unmanufactured tobacco; tobacco refuseUnmanufactured tobacco; tobacco refuse 52.5%
Cane or beet sugar and chemically pure sucrose, in...Cane or beet sugar and chemically pure sucrose, in solid form 9.7%
Tea, whether or not flavouredTea, whether or not flavoured 9.5%
Dried leguminous vegetables, shelled, whether or...Dried leguminous vegetables, shelled, whether or not skinned or split 5.1%
Ground-nuts, whether or not shelled or broken ...Ground-nuts, whether or not shelled or broken (excl. roasted or otherwise cooked) 5.1%
See More Products 18.0%
2.7 bn USD of products imported in 2020
Unused postage, revenue or similar stamps of...Unused postage, revenue or similar stamps of current or new issue in the country in which they have, or will have, a recognised face value; stamp-impressed paper; banknotes; cheque forms; stock, share or bond certificates and similar documents of title 9.1%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 7.2%
Mineral or chemical fertilizers containing two or...Mineral or chemical fertilizers containing two or three of the fertilizing elements nitrogen, phosphorus and potassium; other fertilizers (excl. pure animal or vegetable fertilizers or mineral or chemical nitrogenous, phosphatic or potassic fertilizers); animal, vegetable, mineral or chemical fertilizers in tablets or similar forms or in packages of a gross weight of <= 10 kg 4.3%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 4.2%
Mineral or chemical nitrogenous fertilizers (excl....Mineral or chemical nitrogenous fertilizers (excl. those in pellet or similar forms, or in packages with a gross weight of <= 10 kg) 4.0%
See More Products 71.1%

Source: Comtrade, Latest Available Data

 
 

To go further, check out our service Import Export Flows.

 
 

Main Services

0.2 bn USD of services exported in 2018
27.22%
22.34%
14.94%
13.38%
9.89%
6.80%
3.95%
0.90%
0.57%
0.3 bn USD of services imported in 2018
30.21%
24.94%
17.38%
9.20%
6.59%
4.14%
3.89%
2.66%
1.01%

Source: United Nations Statistics Division, Latest Available Data

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Sources of General Economic Information

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

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Political Outline

Current Political Leaders
Lazarus Chakwera (President of Malawi since 2020)
Next Election Dates
Presidential Election: 2025
Main Political Parties
Malawi is a multi-party state system. The main political parties include:
- People's Party (PP) - centre-right
- Malawi Congress Party (MCP) - centre-right (current President Lazarus Chakwera belongs to the MCP)
- United Democratic Front (UDF) - centre-left
- Democratic Progressive Party (DPP) - liberal
- United Transformation Movement (UTM)
Type of State
Democratic Republic.
Executive Power
Executive power is exercised by the government. The President of Malawi, elected through universal direct suffrage every 5 years, is both chief of state and head of the executive power. The President appoints his Cabinet, whose members can be drawn from either within or outside of the Parliament.
Together with the President, a vice-president is elected. The president can choose to appoint a second vice president, who must be from a different party.
Legislative Power
Legislative power is vested in the Parliament, which under the Constitution has two chambers: the National Assembly - with its 193 members elected for a five-year term in single-seat constituencies - and the Senate - which was originally meant to have 80 seats and had to represent traditional leaders, different geographical districts and special interest groups (such as women, the disabled, young people), but which has never been created.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
62/180

Source: World Press Freedom Index, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Partly Free
Political Freedom:
3/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Malawi, please visit the Ministry of Health's COVID-19 National Information Dashboard.

For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in Malawi and the current sanitary measures in vigour, please consult the Ministry of Health Coronavirus 2020 document.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
There are no officially announced import or export restrictions in Malawi related to COVID-19.
Economic recovery plan
There is no officially announced economic recovery plan in Malawi related to COVID-19 so far. For future possible up-to-date information please visit the website of the Malawi Ministry of Finance, Economic Planning and Development.

For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal monetary and macroeconomic) taken by the Malawian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Malawi in the IMF’s Policy Tracker platform.

Support plan for businesses
For information on the local business support scheme established by the Malawian government and other organizations to help small and medium-sized companies to deal with the economic impacts of the COVID19 epidemic on their activity refer to the Reserve Bank of Malawi’s document Measures to Mitigate the Impact of Covid-19 from the Mobile Network Operators and Microfinance Sector.

For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters

There are no specific import or export restrictions in Malawi related to COVID-19 so far For future possible up-to-date information please visit the website of the Malawian Ministry of Industry and Trade.

 

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Latest Update: April 2022