Malawi is a land-locked country in south-east Africa. The country is home to one of the African Great Lakes and shares borders with Mozambique, Tanzania, and Zambia. Road networks connecting the country to ports in neighboring countries are limited. There has been minimal investment in roads, power, internet connectivity, and general infrastructure. Formal and informal trade barriers may restrict imports and exports, and import tariffs tend to be high. Malawi is one of the least electrified countries in the world; approximately eleven percent of the country has access to regular electricity and internet is unreliable and expensive.
In 2021, Malawi’s population was estimated at 19 million and is expected to reach 38 million by 2038. The annual per capita gross domestic product (GDP) is $636.8. Inflation in recent years has been approximately eight to ten percent but rose to above 12 percent in 2022. The economy is heavily dependent on rain-fed agriculture, employing nearly 80 percent of the population. Unprocessed agricultural outputs account for one-fourth of GDP and 60 percent of export earnings. Tobacco accounts for 40 to 60 percent of exports, with tea, cotton, ground nuts, and coffee making up the rest. Fertilizer and petroleum products account for at least 25 percent of imports, with pharmaceutical products, motor vehicles, equipment, clothing, building materials, and food items making up the rest of the import basket.
The country’s economic growth is slow and volatile; over the past five years economic growth has climbed as high as five percent and dropped to less than one percent. Fiscal mismanagement, poor infrastructure, limited road networks, energy challenges, corruption, and extreme weather related to climate change contribute to Malawi’s growth volatility. Approximately 51 percent of the population lives below the poverty line, with 21 percent living in extreme poverty. Poverty rates are expected to increase in response to continuing impacts from the global COVID-19 pandemic, rampant inflation, and the pass-through effects of external conflicts affecting global supply chains. According to the International Labor Organization (ILO), the unemployment rate is 5.7 percent, but most employment opportunities are in the informal, unskilled labor sector. The government projects economic growths rate of 3.5 percent for 2023 and four percent for 2024; however, the World Bank and International Monetary Fund (IMF) predict growth rates around two percent in 2023 and 2024. According to the World Bank, the economic recovery will be gradual and significant risks remain. Malawi’s major trade partners are South Africa, Belgium, Egypt, Zambia, Zimbabwe, Tanzania, United Kingdom, China, United Arab Emirates, and the United States. The U.S. receives approximately four percent of Malawi’s exports. South Africa, China, United Arab Emirates, and India dominate Malawi’s import sourcing markets, while Belgium, and South Africa are the top destinations for Malawi’s exports. Malawi has a free market system, but the government has placed export controls on essential goods. In July 2020, Malawi enacted the Control of Goods Act (COGA) to make any market controls subject to transparent government and stakeholder review. The Malawian kwacha (mkw) was liberalized in 2012 and remained relatively stable against the U.S. dollar until December 2016. Periodic rate adjustments did not keep up with market fundamentals and a significant mismatch between the shadow market rate and official rate developed until foreign exchange pressures resulted in the Central Bank announcing a 25 percent devaluation in 2022 and numerous smaller devaluations in 2023. Despite the incremental devaluations, the spread between the official and parallel market rates surpassed 50 percent in early 2023. The Central Bank assured investors and other stakeholders that it will maintain a managed floating exchange rate regime. The Government of Malawi and IMF entered negotiations on an Extended Credit Facility (ECF) in early 2022. The negotiations are expected to conclude in late 2023 or early 2024.
Malawi is generally peaceful, democratic, and has no history of major conflicts or terrorism activities. The judiciary, Malawi Police Service, Anti-Corruption Bureau, Financial Intelligence Authority, Malawi Defense Force, and other independent institutions are under resourced, but able to exercise their powers without significant political interference and there is a general acceptance of the rule of law.
Malawi’s main bilateral trade agreements are with China, South Africa, Zimbabwe, Mozambique, and Botswana. Malawi is a member of the World Trade Organization (WTO), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA). Malawi is also a party to the African Growth and Opportunity Act (AGOA) and Everything but Arms (EBA). Malawi participates in the COMESA-SADC-EAC free trade area negotiations and ratified the WTO trade facilitation agreement in July 2017. Malawi signed the African Continent Free Trade Area in 2018 and fully ratified the agreement in 2021.
For background information on the political and economic environment for Malawi, please click on the link to the U.S. Department of State Countries & Areas website.