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About Malawi
Malawi is a land-locked country in south-eastern Africa, bordered by Mozambique, the United Republic of Tanzania and Zambia. It has a primarily agrarian economy, with 80 percent of the population living in the rural areas. The share of agriculture in GDP has dropped in the last decade from almost 40 percent in 2002 to around the average of 21 percent in recent years. Simultaneously, share of service (in GDP) has been rising to about 55 percent owing to reforms in the financial services sector, a boost in the telecom sector driven by a rise in mobile subscriptions and privatization of the transport sector. Additionally, the share of industrial activity (including mining) has been rising in recent years. Malawi’s position in the continent means it is reliant on transit corridors and ports in neighboring countries. The agricultural sector heavily dependent on rain-fed agriculture to maintain food security, Malawi is exceedingly vulnerable to climatic shocks.
The country offers a business environment with political stability, a market-oriented and liberalized economy, competitive labour markets, preferential access to several markets, an investor-friendly climate, improving infrastructure and untapped investment opportunities. The country also has streamlined investment establishment procedures such as a One-Stop Centre to assist investors. Further, the Malawi government has undertaken reforms to ensure that tax, labour, environment, health and safety laws continue to support foreign investment. In terms of ease of doing business, Malawi performs better than the African average (and better than 38 other African countries) when dealing with construction permits, wp-signup.phping new property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency associated with new businesses according to the World Bank in 2020. Moreover, the government is keen to offer public–private partnerships to facilitate and promote strategic infrastructural investment through financial assistance, technical know-how, logistical support and operational management.
Within the basket of goods exported by Malawi, the top ten products comprised 70 percent of total goods exports in 2015, which rose tremendously to 82.5 percent in 2020. Of these, tobacco alone made up 47 percent on average of total exports in the period 2015–2020. Malawi is the fifth-largest exporter of burley tobacco and relies heavily on these exports to support its economy in terms of export earnings and employment generation. Exported variety is produced by small-scale farmers in small landholdings, and production remains dependent on the price of the preceding year. The second largest export is black tea, followed by cane sugar, which is produced chiefly for exports, nuts, peas, and soybeans. Malawi primarily exports to its regional partners in South Africa, Egypt, Zimbabwe, and Mozambique, as well as its extra-regional partners in the European Union (Belgium, Germany, and the Netherlands), the United States (US), and the United Kingdom (UK).
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Economic Facts of Malawi
The unemployment rate in Malawi decreased to 5.60 percent in 2022 from 5.70 percent in 2021. The unemployment rate in Malawi averaged 4.99 percent from 1991 until 2022, reaching an all-time high of 5.70 percent in 2020 and a record low of 4.80 percent in 1991. The top three sectors that employ more people are agriculture, forestry, and fishing, construction and transportation and storage according to NSO 2018.
At the start of 2024, the Ministry of Finance and Economic Affairs projected Malawi's GDP growth rate to be 3.2 percent from 1.9 percent growth in 2023. This optimistic forecast was based on anticipated economic recovery and reforms, including the implementation of the Extended Credit Facility (ECF) program and initiatives aimed at enhancing domestic revenue mobilization and boosting key sectors such as agriculture, tourism, and mining. However, several persistent challenges, such as high inflation constraining private consumption, El Niño-induced weather conditions and liquidity issues affecting fixed investment growth, tempered this optimism. Government spending remained limited due to fiscal consolidation efforts.
By June 2024, the growth projection for Malawi was revised downward to 2.3 percent for 2024. This adjustment reflected ongoing economic challenges, including inflationary pressures, foreign exchange constraints, and the slower-than-expected implementation of critical reforms. Similarly, the World Bank and the International Monetary Fund, which initially projected Malawi’s economic growth rate for 2024 to be 2.8 percent and 3.3 percent, respectively, have revised their forecasts to 2 percent for both organizations.
These revised projections underscore the complex and dynamic economic environment in Malawi, highlighting the need for continued efforts to address structural inefficiencies and boost economic resilience. Government's commitment to economic reform and targeted sectoral growth remains crucial for achieving sustainable economic progress in the face of these obstacles
In July 2024, the Kwacha exhibited a mixed performance against major global currencies. It experienced a slight devaluation of 0.003 percent against the US dollar, settling at a monthly average of MK 1,749.49 per US dollar. In Europe, the currency faced notable declines, depreciating against both the Euro and the British Pound. Specifically, the Kwacha's value fell by 0.66 percent against the Euro, with a monthly average of MK 1,951.02. The British Pound also saw an increase, trading at a monthly average of MK 2,311.98, up from MK 2,287.32 in June 2024, reflecting a 1.08 percent devaluation.
In contrast, the Asian market saw the Kwacha gain ground against major currencies like the Indian Rupee and Chinese Yuan. It reported a 0.14 percent appreciation against the Indian Rupee, averaging MK 20.74, up from MK 20.77 in June 2024. Similarly, it appreciated by 0.12 percent against the Chinese Yuan, achieving a monthly average of MK 238.70, compared to MK 238.99 the previous month.
In the Southern African Development Community (SADC) region, the Kwacha's performance was mixed. It devalued against the South African Rand and the Zambian Kwacha by 1.15 percent and 1.93 percent, respectively. However, it appreciated by 2.06 percent against the Tanzanian Shilling.
Looking ahead, the dynamics of demand and supply are likely to continue exerting pressure on the Kwacha, particularly as the country approaches a new agricultural season, leading to anticipated increases in farm input costs.
Malawi’s trade balance is structurally in deficit. Malawi's trade remains heavily dependent on agriculture, and its exports and imports reflect this reliance on primary and intermediate goods: tobacco accounts for more than half of total exports, as the country is one of the world's largest producers of tobacco. Other major exports include tea, sugar, and agricultural products in general. Imports are led by refined petroleum (7.2% of total imports), machinery, transport equipment, fertilizers, spare parts and medicaments.
In July 2024, the headline inflation rate reached 33.7 percent, experiencing a slight uptick to 33.9 percent in August 2024. This modest increase of 0.2 percentage points underscores persistent inflationary pressures that, while stable, continue to warrant attention. The gradual rise suggests that economic factors contributing to inflation, such as the increasing costs of goods and services, are significant but not escalating at an alarming pace. This stability might be indicative of temporary relief from external shocks or seasonal price variations, yet it still highlights inflation as a pressing concern for the economy.
Food inflation remains a primary driver of overall inflation in Malawi. In July 2024, the food inflation rate stood at 41.9 percent, which edged up to 42 percent in August. This marginal increase reflects ongoing challenges within the food supply chain, including potential disruptions from seasonal fluctuations and production inefficiencies.
Non-food inflation also saw a slight increase, climbing from 22.4 percent in July to 22.7 percent in August 2024. This change suggests a gradual rise in the prices of goods and services outside the food sector.
As we approach the lean season, when food stocks are dwindling, the pressures on food inflation remain considerable.
The Malawi 2063 (MW2063) is Malawi's national vision through which Malawians aspire to transform the country into an inclusively wealthy and self-reliant nation by the year 2063. It is anchored on the three pillars namely; Agricultural Productivity and Commercialization, Industrialization and Urbanization. The MW2063 will be operationalized through four medium term strategies of 10 years each, starting with the MW 2063 First 10-year Implementation Plan (MIP-1) from 2021 to 2030. The MIP-1 is a collection of minimum catalytic interventions that have been determined to contribute to two key milestones of graduating the country to a middle-income status and meeting most of the United Nations Sustainable Development Goals (SDGs) by 2030.
In August 2024, the policy rate was held steady at 26 percent, the same level established in July 2024. The Monetary Policy Committee (MPC) convened on July 24th and 25th, 2024, to assess recent economic trends and determined to maintain the policy rate at 26.0 percent for the third quarter, which concludes in October 2024. The Committee also decided to keep the Lombard rate at 20 basis points above the policy rate, along with the Liquidity Reserve Requirements (LRR) set at 3.75 percent for foreign currency deposits and 8.75 percent for domestic currency deposits.
In making this decision, the MPC recognized that the current monetary policy approach has effectively stabilized non-food inflation and mitigated the spillover effects from food inflation. The Committee emphasized that maintaining this stance will help manage inflationary pressures and work towards the medium-term target of 5 percent.
However, the prevailing fiscal environment poses challenges to monetary policy, evidenced by a significant budget deficit. With the country heading towards the 2025 elections, there are concerns about an impending election-related inflation cycle, which is likely to keep interest rates elevated, particularly during a period marked by sluggish economic productivity.
In July 2024, the market experienced a notable month-on-month increase, with the Malawi All Share Index (MASI) rising by 6.52 percent (6.51 percent in US dollar terms) from 121,101.77 points in June to 128,996.65 points. This also translated to a year-to-date return of 16.26 percent (12.87 percent in US dollar terms). Despite an uptick in trading volume, the total value of shares traded decreased.
During July 2024, the market executed 1,299 trades, involving a total of 35.32 million shares with a combined value of MK3.93 billion. In comparison, June 2024 saw 24.95 million shares traded over 916 transactions, with a total value of MK4.82 billion. This represents a 41.56 percent increase in the number of shares traded, but a decline of 18.44 percent (18.44 percent in US dollar terms) in the total value of transactions.
Out of the 16 companies listed on the Malawi Stock Exchange in July 2024, significant price gains from several firms contributed to an overall increase in the Malawi All Share Index. Notably, NBS recorded a gain of 68.19%, followed by FDHB at 41.87%, OMU at 8.19%, FMBCH at 5.83%, TNM at 1.56%, SUNBIRD at 0.01%, NBM at 0.003%, and STANDARD at 0.002%. These gains more than compensated for the share price declines experienced by AIRTEL (-10.02%), ICON (-0.75%), PCL (-0.28%), NICO (-0.17%), MPICO (-0.07%), and NITL (-0.02%). Consequently, the positive performance of the gaining companies offset the losses, resulting in an overall upward movement in the Malawi All Share Index.
