Malawi Economic Monitor : Getting Reforms Right - Special Topic - Reversing Malawi's Export Decline

Overview & Synopsis

The new administration has initiated a series of important policy reforms, but sluggish growth, heightened inflationary pressures, and insufficient investment continue to undermine living standards. The newly elected administration has initiated important policy reforms to support macroeconomic stabilization since the September 2025 elections, but economic fundamentals remain weak. Malawi’s economy continues to struggle to keep up with population growth, resulting in eroding living standards. Real gross domestic product (GDP) is estimated to have grown by only 1.9 percent in 2025, up slightly from 1.7 percent in 2024, but with the population expanding by around 2.6 percent, GDP per capita fell for the fourth consecutive year. The modest improvement in real GDP in 2025 reflected a partial recovery in agriculture after the 2024 drought. However, output remains constrained by below-average rainfall and shortages of inputs, including fertilizer, and weak industrial activity amid fuel and power supply disruptions, acute foreign exchange shortages, and other structural challenges. Macroeconomic stabilization remains the central priority as the new administration faces difficult choices, while managing growing public pressure following tax increases and price adjustments. The government has initiated long-overdue reforms to restore spending discipline, increase revenues, reprofile domestic debt, and restore policy discipline. However, fiscal and external imbalances remain large. Despite some progress, the challenges of high borrowing, rigid recurrent spending, weak export earnings, and constrained private investment remain largely unresolved. In turn, more will need to be done to advance the necessary macro-fiscal and structural reforms that can bolster investment, support exports, create jobs and enable the higher levels of economic growth needed to achieve the aims set out in Malawi 2063.