Malawi

Business outline for Malawi

Economic Overview

Before the country was hit by the global recession, Malawi’s macro-economic results were impressive. The growth fell to 6% in 2010 and should remain at this level during the coming years. The agricultural sector is the main growth driver, accounting for more than a third of the GDP and ensuring 90% of the export revenues.

Despite the fact that Malawi was spared the global financial crisis epidemic, the economic crisis did affect the country’s growth because of a reduction in the demand of its products, the drop in raw materials prices as well as the fall in investment inflow and the reduction of official development assistance (ODA). The public authorities have signed a three-year accord with the IMF, as part of the Extended Credit Facility, in order to sustain growth and deal with external imbalances. Priority is given to fiscal prudence, social spending on the poorest parts of the population, rationalisation of the foreign currency and exchange rate markets and the improvement of the business climate.

The country’s health and social situation gives reason for concern: life expectancy is 48 years, more than 60% of the population lives on less than 2 dollars per day, more than 14% of the adult population is infected by the Aids virus, and half of the children under five years of age experience developmental problems.

FDI in Figures

Foreign direct investments into Malawi had been gradually increasing since 2003; however, investments are currently being affected by the global crisis and they should be recovering slowly.

The country has a mining and tourism potential which is largely under-exploited; however, due to being landlocked, the poor condition of its infrastructures, irregular electricity distribution the limited domestic market and a high level of competitiveness among the main regional trading partners, slows down the influx of FDI.

The Agricultural sector (especially tobacco) receives most of the foreign investment. The main investing countries are South Africa, Germany and the U.S.A.

Foreign Trade Overview

Malawi is now opening up to international trade, foreign trade representing more than 40% of the GDP in 2009. The country is a member of the WTO and has bilateral trade agreements with its two main trade partners, South Africa and Zimbabwe, exempting customs duties on imports of Malawian products.

As a matter of policy, the country is slowly reducing the protection provided to domestic trade by shifting the sources of revenue collection from customs duties to consumption taxes and direct taxes.

Malawi has a deficit trade balance, a situation which should continue in the coming years.  The country exports tobacco, tea, sugar, coffee, cotton, peanuts, wood products and clothes to Belgium, South Africa, Egypt, Mozambique, Switzerland, the Netherlands, the UK and the USA. It imports foodstuffs, petroleum products, semi-finished goods, consumption goods and transport equipment from South Africa, Mozambique, China, India, the UK, the UAE, Tanzania and the United States. The country’s main trade partners are the SADC (Community Development Southern Africa) members countries, the European Union and the United Arab Emirates .