Economy - overview: Landlocked Malawi ranks among the world's most densely populated and least developed countries. The country’s economic performance has historically been constrained by policy inconsistency, macroeconomic instability, limited connectivity to the region and the world, poor infrastructure, rampant corruption, high population growth, and poor health and education outcomes that limit labor productivity. The economy is predominately agricultural with about 80% of the population living in rural areas. Agriculture accounts for about one-third of GDP and 80% of export revenues. The performance of the tobacco sector is key to short-term growth as tobacco accounts for more than half of exports.
The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. In 2006, Malawi was approved for relief under the Heavily Indebted Poor Countries (HIPC) program but recent increases in domestic borrowing mean that debt servicing in 2016 exceeded the levels prior to HIPC debt relief. President MUTHARIKA launched the Public Financial Management and Public Sector reform programs upon taking office in 2014 to increase accountability following the 2013 “Cashgate” scandal.
Heavily dependent on rain-fed agriculture, with corn being the staple crop, Malawi’s economy was hit hard by the El Nino-driven drought in 2015-16. The drought also slowed economic activity, led to two consecutive years of declining economic growth, and contributed to high inflation rates. Following a successful humanitarian response in 2016-2017 providing food assistance to 6.7 million people - 40% of the population - and increased transparency by agricultural parastatals, the economy has stabilized and inflation is dropping.
Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.
Source: CIA World Factbook - This page was last updated on July 9, 2017