By Burnett Munthali
I want to provide leadership that makes everybody prosper, that deals decisively with corruption and theft of public funds and a leadership that will follow the rule of law,” President Reverend Lazarus Chakwera told the BBC. – 28 June 2020_
The fiscal deficit remains high despite efforts towards fiscal consolidation. The Malawi Economic Monitor (MEM) emphasizes the restoration of macroeconomic stability, the support for growth recovery, and the protection of the poor from shocks. The Special Theme of the 17th MEM highlights that Malawi’s rate of electricity access is among the lowest in the world, and enhancing electricity access is key for economic development and the achievement of Malawi 2063.
The Malawi Economic Monitor (MEM) is a biannual World Bank report series. The MEM provides an analysis of economic and structural development issues and prospects in Malawi. The publication intends to foster better-informed policy analysis and debate regarding the key challenges that Malawi faces in its endeavor to achieve inclusive and sustainable economic growth. It is intended for a wide audience, including policy makers, business leaders, financial market participants, academia, and civil society organizations engaged in Malawi’s evolving economy.
December 2020
The pandemic induced a sharp recession in many countries across the globe. Malawi’s economy was heavily affected, with growth projected at 1.0 percent in 2020, down from earlier projections of 4.8 percent. With population growth around 3.0 percent, this represented a 2.0 percent contraction in per capita GDP. Global and domestic factors emanating from the pandemic are affecting Malawi’s economy, including: 1) disruption in global value chains and trade and logistics; 2) decrease in tourism; and 3) decrease in remittances. Lower international oil prices, on the other hand, helped reduce the import bill and alleviated fuel and transportation price pressures.
Services and industry sectors were particularly hard hit, leading to a heavier impact in urban areas. However, favorable weather conditions supported a strong agricultural harvest, particularly for maize, which was supporting growth and food security. Yet, production of key export crops, particularly tobacco, declined. Poverty reduction in Malawi has stagnated in the last 15 years and is expected to worsen with the pandemic. The account deficit was projected to expand to 19.6 percent of GDP in 2020, up from 17.8 percent in 2019.
June 2021
Malawi was affected by a severe second wave of COVID-19 (coronavirus) cases starting in the last weeks of 2020. Case numbers peaked in January and gradually subsided through April, when restrictions were relaxed. Growth in 2020 was strongly affected by the pandemic, falling to an estimated 0.8 percent, down from pre-pandemic projections of 4.8 percent. The pandemic’s impact on the services and industry sectors was partially offset by a strong agricultural harvest.
Services and industry slumped amid the ongoing disruptions caused by the pandemic to global value chains and trade and logistics, decreases in tourism and remittances, and dampened demand due to social distancing measures. Agricultural production estimates for 2021 were strong, but the pandemic still weighed on economic activity. Maize production was expected to increase to 4.5 million tons, a 17 percent increase over 2020’s bumper harvest. Business sentiment was showing some improvement in early 2021 but was still below pre-pandemic levels.
December 2021
Economic growth was projected to pick up from 0.8 percent in 2020 to 2.4 percent in 2021, primarily driven by one-time increases in the agricultural sector. With a population growth rate around 3.0 percent, however, this level of economic growth equated to a contraction in per capita output. Favorable weather, as well as increased fertilizer use due to the Affordable Inputs Program (AIP), led to record harvests. While agriculture accounts for the bulk of overall growth, growth in services and industry sectors improved but remained tepid. Malawi began a fourth wave of infections induced by the Omicron variant, and the Government modestly tightened restrictions.
With less stringent social distancing policies, demand improved from low levels. However, the private sector still faced multiple concerns which weighed on performance and investment. These included limited availability of foreign exchange, compulsory liquidation of foreign exchange, inflation on imported items (particularly fuel), perceptions of heavy taxation, limited credit, and cumbersome regulation. Headline inflation increased to double digits in November and prices increase heightened concerns about the cost of living.
June 2022
The 15th Edition of the MEM underscored significant deterioration in the government’s finances, with the deficit reaching its highest level in over a decade. Malawi’s economic growth was expected to decline further due to these chronic imbalances, which heightened by severe weather events. The Ukraine-Russia war added a new crisis to what was already a challenging economic climate, with rising prices for fuel, fertilizer and other commodities impacting foreign reserves and exerted pressure on inflation.
While risks to the Malawian economy tilted to the downside, the government begun implementing critical policy reforms that were aimed to address macroeconomic imbalances and secure a recovery. In the context of these fiscal constraints, the Special Theme of the 15th MEM highlighted the importance of deepening fiscal decentralization, strengthening the intergovernmental fiscal transfer system, and delivering quality services that reach poor and vulnerable households.
December 2022
The combined effects of adverse weather, acute foreign exchange shortages, disruptions to electricity, and the high rate of inflation, meant Malawi continued to face an economic slowdown. This report showed the emerging impacts of the economic crisis where higher government spending continued to widen the fiscal deficit, exerting pressure on the government’s fiscal consolidation plans. Malawi’s public debt was assessed to be in distress, though ongoing debt restructuring negotiations helped ensure debt sustainability over the medium term.
July 2023
Malawi’s economy continued to struggle amidst a devastating cyclone, rising inflation and a protracted macro-fiscal crisis. The economy weakened by foreign exchange shortages that constrained the importation of essential commodities and production inputs as well as a generally unfavorable external environment. The fiscal deficit remained high despite efforts towards fiscal consolidation. The MEM emphasized the restoration of macroeconomic stability, the support for growth recovery, and the protection of the poor from shocks. The Special Theme of the 17th MEM highlighted that Malawi’s rate of electricity access was among the lowest in the world, and enhancing electricity access was key for economic development and the achievement of Malawi 2063.
