2013 Index of Economic Freedom

Malawi

overall score55.3
world rank118
Rule of Law

Property Rights40.0

Freedom From Corruption30.0

Limited Government

Government Spending60.0

Fiscal Freedom78.4

Regulatory Efficiency

Business Freedom41.1

Labor Freedom58.8

Monetary Freedom72.5

Open Markets

Trade Freedom71.8

Investment Freedom50.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 16.2 million
  • GDP (PPP):
    • $13.9 billion
    • 5.5% growth
    • 7.8% 5-year compound annual growth
    • $860 per capita
  • Unemployment:
  • Inflation (CPI):
    • 7.6%
  • FDI Inflow:
    • $56.3 million
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Malawi’s economic freedom score is 55.3, making its economy the 118th freest in the 2013 Index. Its score has decreased 1.1 points from last year, reflecting declines in six of the 10 economic freedoms including property rights and freedom from corruption. Malawi is ranked 20th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average.

The Malawi economy has demonstrated resilience in weathering the global slowdown, achieving an average annual growth rate of about 8 percent over the past five years. Recent reform measures have put greater emphasis on simplifying the business start-up process and creating a more vibrant private sector through decentralization.

Nonetheless, Malawi’s growth potential remains fragile and hampered by inefficient legal and investment regimes that undermine entrepreneurship and job growth. With the control of government spending worsening, lingering state interference in the private economy discourages dynamic long-term economic development. Pervasive corruption and a weak judicial system add uncertainty and risk.

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Background

After achieving independence in 1964, Malawi was ruled as a one-party state by Dr. Hastings Kamuzu Banda for 30 years. Multi-party elections elevated Bakili Muluzi to the presidency in 1994. President Bingu wa Mutharika, elected in 2004, resigned from the ruling United Democratic Front a year later and formed a new political party. Mutharika was re-elected in May 2009 but died suddenly in April 2012 and was replaced by Vice President Joyce Banda. Malawi is one of Africa’s most densely populated countries. Over 85 percent of the population depends on subsistence agriculture, and the agricultural sector accounts for over 35 percent of GDP and over 80 percent of exports. Tobacco, tea, and sugar are the most important exports. The United Kingdom has suspended budgetary aid, which totals almost $27 million, because of alleged human rights abuses and poor economic management. Banda has reversed several of her predecessor’s anti-market economic policies in a bid to have donor funding restored.

Rule of LawView Methodology

Property Rights 40.0 Create a Graph using this measurement

Freedom From Corruption 30.0 Create a Graph using this measurement

Property rights are not protected effectively, and the rule of law is weak. Court proceedings can be very slow. There are reports of government intervention in some judicial cases and frequent allegations of bribery in civil and criminal cases. Corruption remains widespread, and there allegedly are serious problems in agencies handling customs, taxes, and procurement.

Limited GovernmentView Methodology

The top income and corporate tax rates are 30 percent. Other taxes include a value-added tax (VAT) and an inheritance tax. The overall tax burden equals 19.1 percent of total domestic income. Government spending has risen to 36.5 percent of total domestic output. The budget balance has spiked at 7.9 percent of GDP, but public debt remains below 50 percent of GDP. Malawi has been unable to meet the terms of its IMF credit facility.

Regulatory EfficiencyView Methodology

Launching a business has become more straightforward, but licensing can still take 200 days and cost over 10 times the level of average annual income. The labor market remains poorly developed. Most of the population is employed outside of the formal sector, primarily in agriculture. Inflation has been increasing, and the government continues to influence prices on a range of goods and services through state-owned enterprises.

Open MarketsView Methodology

The trade-weighted average tariff rate is 6.6 percent, and non-tariff barriers further hamper dynamic growth in trade. Both foreign and domestic investors are subject to government restrictions and heavy bureaucracy. The financial sector, dominated by banking, remains underdeveloped, and a full range of modern financing tools is not readily available. Capital transactions and foreign exchange accounts are also limited.

Country's Score Over Time

Bar Graph of Malawi Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Malawi to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.9-0.1
2Botswana70.61.0
3Rwanda64.1-0.8
4Cape Verde63.70.2
5Madagascar62-0.4
6South Africa61.8-0.9
7Ghana61.30.6
8Uganda61.1-0.8
9Namibia60.3-1.6
10Burkina Faso59.9-0.7
11The Gambia58.80.0
12Zambia58.70.4
13Tanzania57.90.9
14Gabon57.81.4
15Benin57.61.9
16Swaziland57.20.0
17Mali56.40.6
18Kenya55.9-1.6
19Senegal55.50.1
20Malawi55.3-1.1
21Nigeria55.1-1.2
22Mozambique 55-2.1
23Seychelles54.91.9
24Côte d'Ivoire 54.1-0.2
25Djibouti53.90.0
26Niger53.9-0.4
27Cameroon52.30.5
28Mauritania52.3-0.7
29Guinea51.20.4
30Guinea-Bissau51.11.0
31Central African Republic50.40.1
32Ethiopia49.4-2.6
33Liberia49.30.7
34Burundi490.9
35Togo48.80.5
36Sierra Leone48.3-0.8
37São Tomé and Príncipe 48-2.2
38Lesotho47.91.3
39Comoros47.51.8
40Angola47.30.6
41Chad45.20.4
42Republic of Congo 43.5-0.3
43Equatorial Guinea42.3-0.5
44Democratic Republic of Congo39.6-1.5
45Eritrea36.30.1
46Zimbabwe28.62.3
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