Economy of Malawi
KEY FACTS 2015
GNI: US$5.9 billion
GNI p.c.: US$340
GDP growth: 2.8% p.a. 2011–15
Inflation: 21.2% p.a. 2011–15
At independence in 1964, Malawi was one of the poorest and least developed countries in the world. It was further disadvantaged when civil war in Mozambique strangled its export trade for over a decade, and when afflicted with long periods of drought, for example between 1991 and 1994, and in 2002. Yet it achieved substantial growth from the 1960s, based on agricultural exports and tobacco in particular.
The country’s dependence on agricultural commodities has meant that there have been periods of slow or negative growth when commodity prices have been depressed or international demand subdued, or in periods of drought. At these times foreign debt grew far quicker than GDP and exports, and debt servicing became a heavy burden.
After one such period in the early 1990s, the government embarked on economic reforms, including stronger fiscal discipline, public spending cuts, greater accountability and a programme of privatisation, and was supported by a series of World Bank structural adjustment loans and International Monetary Fund (IMF) stabilisation programmes. In the 2000s there was investment in some light manufacturing, especially in the production of clothing and textiles for export to the USA.
In 2006, the country qualified for debt relief under the IMF/World Bank Heavily Indebted Poor Countries Initiative.
These reforms led to a gradual recovery, with better agricultural performance, higher commodity prices (notably for tea) and increased export earnings. However, growth slowed during 2000 due to a poor maize harvest, weaker tobacco prices, the growing economic burden of the loss of skilled workers and health care costs of HIV/AIDS. The economy shrank by more than four per cent in 2001 before recovering in 2002, becoming strong during 2006–09. Then in 2010, following the world economic downturn of 2008–09, the economy went sharply into recession before growth of at least 5% p.a. resumed in 2013–15. Keeping inflation under control, however, proved more challenging. It was 27.3% in 2013 and remained around 20% in late 2016.