Economic Analysis


Population 21.5 million
GDP per capita 559 US$
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major macro economic indicators

  2020 2021 2022 (e) 2023 (f)
GDP growth (%) 0.9 2.2 1.2 2.0
Inflation (yearly average, %) 7.6 11.5 21.0 25.0
Budget balance (% GDP) -8.2 -8.9 -7.1 -8.0
Current account balance (% GDP) -13.8 -12.2 -12.1 -12.9
Public debt (% GDP) 54.8 63.9 73.3 74.5

(e): Estimate (f): Forecast *Fiscal year 2021 from 1st July 2020 to 30th June 2021 / Grants included


  • Natural resources (tobacco, tea, coffee, sugar, soya, uranium, niobium)
  • Growing service sector
  • Active civilian society


  • Economy dominated by subsistence agriculture (75% of jobs, but only 23% of GDP), vulnerable to climate hazards and input prices
  • Food insecurity, extreme poverty (70% of the population in 2020)
  • Infrastructure deficit (water, energy, transport, education, health) and geographical isolation
  • Widespread corruption
  • High public debt fuelled by a high deficit
  • Extremely low foreign exchange reserves maintained by a massive deficit in trade in goods (fertilisers, fuel, medicines) and services, despite remittances from expatriates and international aid


Slight recovery does not alleviate food insecurity

Coface forecasts a slight rebound in the local economy in 2023, albeit conditional on several improvements. In 2022, economic activity was heavily affected by destruction wreaked by cyclone Ana in January 2022, power cuts and fallout from the war in Ukraine on the local economy. In particular, the cyclone damaged the Kapichira dam, which provided one-third of the country's electricity at the time, as well as 17,000 hectares of cultivated land in the south of the country. Already well apparent before the war in Ukraine, food insecurity has worsened in 2022-23 on back of food inflation and higher fertiliser prices, despite the delivery of 20,000 tonnes of Russian fertiliser confiscated by the EU. Financing difficulties and public debt deemed unsustainable led Lilongwe to allow electricity, fuel and maize prices to rise, raising fears of unrest. A favourable base effect in agriculture (accounting for ~80% of employment) should therefore support growth, but the situation is expected to remain very difficult. Nearly 4 million people (~20% of the population) are expected to have faced extreme food shortages between October 2022 and March 2023.

Indian and Chinese investors are looking to exploit the country’s natural resources and electricity needs. In addition, the World Bank is supporting an ongoing grid interconnection project between Mozambique and Malawi, with planned exchange capacity of 50 MW and full implementation by 2024. After completing a cooperation project in the power sector, the US announced in October 2022 a USD 350 million grant for rural roads through the Millennium Challenge Corporation. Other foreign investors are otherwise waiting for the IMF to grant a funded programme as a positive signal to take a larger share in the capital formation. The development of the mining sector could attract private investment, such as the Kaniyka niobium project, which received an operating licence in 2021, and the Kayelekera uranium mine, which was shut down in 2013 due to insufficiently high selling prices. IT services were launched in 2017 and efforts are continuing to make the Internet accessible to as many people as possible: a data centre was opened in 2022, demonstrating the growing strength of the fibre network. However, the operation of all these infrastructures will continue to be largely curbed by the weakness of the electricity supply (70% of the electricity being generated by fluctuating hydroelectric production) and a challenging operating environment. Apart from investments financed by foreign project aid, the government is unlikely to have the financial means or especially the capacity to eradicate extreme poverty in the medium term. Public consumption should therefore be stable overall, but still remain a sizeable part of the economy.

Net imports should have a neutral effect on growth: tobacco receipts (50% of exports in 2021) are structurally stable but the likely global economic slowdown should depress demand for other local agricultural products, while the food and energy import bill should ease slightly.


Debt restructuring required before IMF loan

Realistic negotiations with international commercial creditors began in late November 2022. In addition, the IMF released USD 88 million in the same month through its "food emergency" credit window. An effective use of these funds and restructuring of the external public debt (about half of the total public debt), especially the commercial portion (25% of total external debt, but the most expensive part), should pave the way for discussions towards an IMF programme providing a more substantial loan. However, this will probably not happen before the end of 2023. Despite Malawi’s economic growth, the public deficit is expected to remain stable and high due to the burden of the Affordable Inputs programme, providing subsidised fertiliser to farmers, as well as investments supported by concessional loans. External financing difficulties are pushing the government to turn to the domestic financial market, which covers more than 75% of its financing needs. The risk attached prompts the market to grant the government loans at high interest rates, which should continue to push up the share of public revenue devoted to interest payments (40% of revenue and 6% of GDP projected for the 2022-23 budget). As a result, debt will continue to rise. The government should probably choose to reduce the coverage of the fertiliser programme, which is very expensive due to high prices in place since 2021. After being officially devalued by 25% in May 2022, the kwacha continues to depreciate on the parallel market and the shortage of foreign currency is expected to persist due to pressure from the current account deficit. According to the World Bank, foreign exchange reserves are expected to have been below one and a half months of imports at the end of 2022.


The current account deficit is structurally high due to the country's dependence on imports of fuel, capital goods and fertilisers.

The trade deficit should stabilise because, while the fall in foreign demand should affect export earnings (tobacco, tea, sugar) via a negative price effect, albeit mitigated by the solid performance of agricultural production, imports will lighten. The services deficit will widen with the continued recovery of international passenger transport. The primary income deficit, linked to the repatriation of foreign investors' income, will continue to weigh on the current account, while the current transfers surplus will be driven by expatriate remittances (about 8% of GDP). The country will continue to rely on external development assistance in the form of project loans to finance its current account deficit.


Risk of social instability exacerbated by very low standard of living

Paradoxically, Malawi remains one of the poorest countries in the world despite receiving project loans and international aid which respectively accounted for 10% and 1.4% of GDP in 2022-23, and its peaceful existence since independence in 1964. In 2020, some 73.5% of the population lived on less than $1.9 (PPP 2011). Following Storm Ana and a subsequent decline in access to clean water, a cholera epidemic has affected the country since the spring of 2022: more than 1,000 deaths were recorded at the beginning of 2023 and the authorities had to close schools for a fortnight. The population's discontent is also being ignited by endemic poverty, a string of corruption scandals, mismanagement of public funds and deficient public services. Demonstrations took place in November 2022 against the high cost of fuel. After the Constitutional Court annulled the 2019 presidential election on the grounds of electoral fraud, Lazarus Chakwera, leader of the Malawi Congress Party (MCP), won the new presidential election in June 2020, obtaining 59% of the vote ahead of incumbent President Peter Mutharika who had been in office since 2014. The MCP holds 59 seats out of 193 in Parliament and is expected to continue to lead a minority government with the support of the United Transformation Movement (5 seats), the People's Party (4) and 33 independents, while the Democratic Progressive Party is now the main opposition party. In November 2022, Vice-President Chilima was arrested on corruption charges, which can be interpreted as a timely political move by President Chawkera as well as a response to pressure from international donors.

Through its external relations, the Malawian government is pursuing its objectives of food security and electricity grid improvements, which are indirectly subject to fiscal consolidation.


Last updated: April 2023

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