Malawi's economic recovery remains fragile, hindered by slow reform implementation and recent shocks. The Malawi Economic Monitor (MEM), 20th Edition, titled "The Rising Cost of Inaction with a special topic, Unlocking the Potential of Malawi’s Mining Sector," highlights key challenges and opportunities facing the nation.
The report notes that GDP growth for 2024 is estimated at 1.8%, down from an earlier projection of 2.0%. With population growth at 2.6%, this marks a continued decline in GDP per capita for the third consecutive year. Agricultural output has been adversely affected by an El Niño-induced drought, contracting by 2.0% in 2024. Inflation remains high due to rising prices and rapid money supply growth.
Food insecurity persists as a major concern, with weak harvests expected to continue into the challenging 2024-25 season. About 5.7 million people are projected to face crisis-level food insecurity between October 2024 and March 2025.
Reform momentum has stalled, increasing fiscal and external imbalances. The MEM stresses that delays in addressing these issues will exacerbate future adjustments' scale and risks further deterioration.
The report outlines urgent policy measures to restore macroeconomic stability, create conditions for increased private investment and exports, and build resilience while protecting poor households.
"Restoring macroeconomic stability: Planned macro-fiscal reforms must be fully implemented," states the MEM, emphasizing fiscal consolidation targets, debt restructuring, reserve accumulation through exchange-rate reforms, inflation control by limiting money supply growth, and halting monetary financing of fiscal deficits.
On investment conditions: "Increasing investment is critical for sustainable growth... success will be determined by whether the private sector is willing to invest."
To address food production shortfalls: "Advance the process of reforming the AIP... implementing Disaster Risk Management Act... finalizing Energy Compact."
A special focus on Malawi's mining sector identifies energy transition minerals as potential accelerators of economic growth if key constraints are addressed.
"Improving the environment for mining investment would significantly alleviate fiscal pressures," suggests the MEM.
Recommendations include adopting policies for sustained mining sector growth, boosting government institutional capacity like MEPA for social/environmental protection, and ensuring efficient revenue management systems.
Malawi stands poised to leverage its mineral wealth towards sustainable development by prioritizing outlined actions within MEM’s Special Topic section.