
Malawi’s Investment Surge: Capitalizing on Emerging Opportunities
Key Business Points
- Investment in Malawi’s economy is declining, with the share of capital formation in GDP falling from 20.3% in 2017 to 11.2% in 2023, indicating a structural challenge that may impact long-term growth and job creation.
- Macro and structural challenges are attributed to the decline, including exchange rate volatility, with the kwacha devaluing by 44% in November 2023, discouraging long-term investment.
- Policy interventions are recommended to reverse the trend, including restoring macroeconomic stability, reducing the fiscal deficit, and stabilizing the exchange rate to attract domestic and foreign direct investment.
Malawi’s economy is experiencing a notable decline in investment, with the share of capital formation in gross domestic product (GDP) falling sharply over the past six years. According to the latest National Statistical Office (NSO) data, gross fixed capital formation, which includes spending on infrastructure, machinery, and other long-term productive assets, has decreased from 20.3% of GDP in 2017 to 11.2% in 2023. This consistent decline suggests a deeper structural challenge that could jeopardize the country’s long-term growth and job creation prospects.
Economist Paul Kwengwere, who is also an International Trade Council board member, attributes the fall in gross fixed capital formation to both macroeconomic and structural challenges. He notes that exchange rate volatility has played a significant role, with the 44% devaluation of the kwacha in November 2023 causing uncertainty that discourages long-term investment. Kwengwere recommends several policy interventions to reverse the trend, including restoring macroeconomic stability by reducing the fiscal deficit, maintaining a tight monetary policy, and stabilizing the exchange rate.
University of Malawi macroeconomics lecturer Edward Lemani also points to economic instability and worsening macroeconomic indicators as the main drivers of the country’s underinvestment. He cites higher inflation, volatile exchange rates, and depreciation as factors that have resulted in declining domestic and foreign direct investment. The report indicates that capital investment in dwellings, buildings, and machinery showed mixed trends, highlighting the need for targeted interventions to boost investment in these areas.
The findings of the report are based on newly rebased GDP estimates, using 2017 as the base year, to better reflect current economic realities. As Malawi’s business community looks to the future, it is essential to address the structural challenges and implement policy interventions to restore macroeconomic stability and attract investment. By doing so, the country can promote tsogolo lathu (our future) and create opportunities for mphatlalatsa (entrepreneurs) to thrive.
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