Malawi’s economy remained fragile in 2025, marked by modest growth, persistently high inflation, managed exchange rate volatility and severe fiscal pressures, the Economics Association of Malawi (Ecama) has said.
In its written review of the year, Ecama president Bertha Bangara Chikadza says GDP growth was revised downwards to 2.7 percent, failing to keep pace with population growth as inflation eroded purchasing power.
Bangara Chikadza further says that growth barely matched Malawi’s estimated population growth of 2.9 percent and remained far below the six percent threshold required for meaningful poverty reduction.
“Growth remains heavily dependent on rain-fed agriculture with very limited diversification. That leaves the economy extremely vulnerable to climate and external shocks,” the review says.
Ecama observes that inflation eased marginally towards the end of the year, falling to 27.9 percent year-on-year in November from 29.1 percent in October, but remained severely damaging to living standards.
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The think tank adds that food inflation, driven by weak domestic production and exchange rate pass-through, remained the dominant pressure, with government projecting average inflation of about 28.5 percent in 2025 before easing to 20.7 percent in 2026.
Forex scarcity was identified as one of the most critical challenges in 2025, with reserves remaining below two months of import cover for most of the year and the gap between official and parallel market rates continuing to widen despite the 2022 and 2023 devaluations of the kwacha.
“Stability was tentative and dependent on intermittent inflows from development partners and thin tobacco proceeds and remittances, an indication of continued forex disequilibrium.
“The mid-year review explicitly links low reserves to ECF expiry in May 2025, aid withdrawal, a narrow export base and debt service demands,” Chikadza says.
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Fiscal management remained the dominant macroeconomic constraint, according to Ecama.
The International Monetary Fund estimates Malawi’s public debt at about 88 percent of GDP, with interest costs nearing seven percent of GDP.
Although government had projected debt to decline to around 71 percent by the end of 2025, Ecama said debt distress remained severe with the fiscal deficit still projected above seven percent of GDP.
Chikadza says macroeconomic stabilisation efforts were evident but Malawi remained trapped in a low-growth, high-inflation, low-forex equilibrium constrained by fiscal stress.
Looking ahead, Ecama says 2026 could see modest improvement only if food supply strengthens, forex inflows rise and fiscal credibility is restored.
“The outlook is one of cautious, conditional and fragile stabilisation,” she said.
However, the association warns that downside risks remain significant, including another poor agricultural season, intensified forex shortages and fiscal slippages.
Under a normal 2025-26 rainfall season, improved forex inflows and restored fiscal discipline, Ecama projects growth to rise to between 3.5 and 4.5 percent in 2026.
Inflation is expected to gradually ease to between 15 and 20 percent by the end of 2026, although the association said a return to single digits within the year remains unlikely.
Minister of Finance, Economic Affairs and Decentralisation Joseph Mwanamvekha said in the Mid-Year Budget Statement that Malawi’s economic growth had declined sharply over the past five years from an average of five percent in 2019 but is expected to rebound through investment in agriculture, tourism, mining, manufacturing and digitalisation.
