Malawi Economic Outlook

  • In 2014 Malawi’s real GDP growth was estimated at 5.7%, mainly driven by agriculture.
  • Monetary policy was tightened in 2014 with the aim of bringing down the persistently high inflation rate to a single digit by the end of 2015 but development partners continued to withhold general budgetary support, causing significant fiscal stress given the country’s heavy reliance on donor budget financing.
  • The spatial dimensions of poverty in Malawi are reflected in rural-urban variations in the incidence of poverty and access to economic opportunities, underscoring the importance of policies with territorial focus.

In 2014, Malawi’s economy continued on the path to recovery in the aftermath of the economic crisis of 2012, which saw a contraction in real gross domestic product (GDP) growth to 2.1%. Real GDP growth in 2014 is estimated to have been 5.7%, driven largely by agriculture, but with significant contributions from manufacturing, wholesale and retail trade, and services. Growth in 2015 is projected to slow to 5.5% following the late arrival of rains and the severe floods experienced in January 2015, which damaged crops and infrastructure. Growth momentum is expected to resume in 2016, with projected growth of 5.7%, assuming improved investor confidence, favourable weather conditions, higher agricultural exports, lower inflation and moderate interest rates.
Inflation in 2014 remained in double digits (24.1%) as the kwacha (MWK) continued to depreciate, especially during the lean tobacco season and in the absence of donor budgetary support. Monetary policy remained tight in 2014, reflecting the need to curb inflation. Inflationary pressures are, however, expected to ease in 2015 with the fall in global oil prices and the kwacha’s stabilisation. Fiscal conditions in 2013/14 (July to June) deteriorated, largely because of the withdrawal of budgetary support by development partners. The fiscal deficit widened to 4.3% in 2013/14 from 0.2% in 2012/13, resulting in higher than programmed domestic financing, exerting pressure on interest rates. It is crucial for the government to sustain fiscal consolidation efforts to bring down inflation quickly and reduce interest rates.
On 20 May 2014, Malawi held tripartite elections (presidential, parliamentary and local). The presidential elections were hotly contested with Arthur Peter Mutharika, leader of one of the main opposition parties, the Democratic Progressive Party (DPP), emerging victorious by a narrow margin. The DPP-led government has committed itself to continuing with sound macroeconomic reforms, reforming the public sector and strengthening the PFM system in the wake of the so-called Cashgate corruption scandal. The government has developed a public financial management (PFM) reform action plan to improve financial controls and accountability in the PFM environment.
The spatial dimensions of poverty and development in Malawi are manifested in regional and rural-urban variations in the incidence of poverty, access to services, pattern of resource endowment and economic opportunities. While the Malawi Growth and Development Strategy II (MGDS II) makes no explicit reference to spatial planning, it seeks to redistribute wealth to all citizens by using rural growth centres to serve as socio-economic hubs, thereby reducing ruralurban migration.