2020 Index of Economic Freedom

Malawi

OVERALL SCORE52.8
WORLD RANK152
Rule of Law

Property Rights43.1

Judicial Effectiveness42.1

Government Integrity24.8

Government Size

Tax Burden79.0

Government Spending71.7

Fiscal Health23.6

Regulatory Efficiency

Business Freedom41.9

Labor Freedom62.8

Monetary Freedom69.1

Open Markets

Trade Freedom75.4

Investment Freedom50.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 19.7 million
  • GDP (PPP):
    • $23.7 billion
    • 3.2% growth
    • 3.6% 5-year compound annual growth
    • $1,199 per capita
  • Unemployment:
    • 5.4%
  • Inflation (CPI):
    • 9.2%
  • FDI Inflow:
    • $101.6 million

Malawi’s economic freedom score is 52.8, making its economy the 152nd freest in the 2020 Index. Its overall score has increased by 1.4 points, helped by a higher property rights score. Malawi is ranked 34th among 47 countries in the Sub-Saharan Africa region, and its overall score is slightly below the regional average and well below the world average.

The economy of Malawi has been in the mostly unfree category since the inception of the Index in 1995. GDP growth in the past half-decade has been moderate as generally favorable weather conditions have increased crop yields.

Greater economic freedom in Malawi has long been held back by several factors. The ineffective rule of law, indicated clearly by weaknesses in property rights protection, judicial effectiveness, and government integrity, has had a strongly negative impact on the business and investment climates, and the government’s ongoing payment of wasteful producer and consumer subsidies has strained the budget.

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Background

Malawi achieved independence from the United Kingdom in 1964 and was ruled as a one-party state by Dr. Hastings Kamuzu Banda for 30 years. Arthur Peter Mutharika won the presidency in 2014 in elections of questionable legitimacy. His brother, former President Bingu wa Mutharika, had died in office in 2012. Despite having been accused of corruption by the country’s Anti-Corruption Bureau in 2018, Mutharika was narrowly reelected in May 2019 in general elections that were marred by irregularities. More than half of the population lives below the poverty line, dependent primarily on subsistence agriculture. Tobacco, tea, and sugar are important exports. A border dispute with Tanzania centers on Lake Malawi and its potentially large oil and gas reserves.

Rule of LawView Methodology

Property Rights 43.1 Create a Graph using this measurement

Judicial Effectiveness 42.1 Create a Graph using this measurement

Government Integrity 24.8 Create a Graph using this measurement

Malawi has laws that govern rights to both real and intellectual property, but enforcement is weak. Record-keeping for the registration of land ownership is centralized and inefficient. Although judicial independence is generally respected, heavy caseloads, staffing limitations, and inadequate funding can contribute to delays. Corruption is endemic at all levels of government.

Government SizeView Methodology

The top individual income and corporate tax rates are 30 percent. Other taxes include value-added and inheritance taxes. The overall tax burden equals 17.3 percent of total domestic income. Government spending has amounted to 30.7 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 6.6 percent of GDP. Public debt is equivalent to 61.3 percent of GDP.

Regulatory EfficiencyView Methodology

The government, aided by international donor assistance, increased access to electricity in 2018. The vast majority of the labor force works informally. There is an acute shortage of skilled and semiskilled labor in many fields, including financial management, law, economics, information technology, engineering, and medicine. According to the IMF, the government spent more than $250 million on subsidies in 2018.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 65.3 percent of GDP. The average applied tariff rate is 4.8 percent, and nontariff barriers further restrict trade flows. 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.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Mauritius74.91.9
2Rwanda70.9-0.2
3Botswana69.60.1
4Seychelles64.32.9
5Cabo Verde63.60.5
6Tanzania61.71.5
7Namibia60.92.2
8Madagascar60.53.9
9Côte d'Ivoire 59.7-2.7
10Uganda59.5-0.2
11Ghana59.41.9
12South Africa58.80.5
13Senegal581.7
14Nigeria57.2-0.1
15Burkina Faso56.7-2.7
16Gabon56.70.4
17Guinea56.50.8
18The Gambia56.33.9
19São Tomé and Príncipe 56.22.2
20Mali55.9-2.2
21Mauritania55.3-0.4
22Eswatini55.30.6
23Kenya55.30.2
24Benin55.2-0.1
25Niger54.73.1
26Lesotho54.51.4
27Togo54.13.8
28Comoros53.7-1.7
29Cameroon53.61.2
30Ethiopia53.60.0
31Zambia53.5-0.1
32Guinea-Bissau53.3-0.7
33Djibouti52.95.8
34Malawi52.81.4
35Angola52.21.6
36Central African Republic50.71.6
37Mozambique 50.51.9
38Chad50.20.3
39Democratic Republic of Congo49.5-0.8
40Liberia49-0.7
41Burundi490.1
42Equatorial Guinea48.37.3
43Sierra Leone480.5
44Sudan45-2.7
45Zimbabwe43.12.7
46Republic of Congo 41.82.1
47Eritrea38.5-0.4
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