Malawi reduces its growth projection for 2025 as demonstrations are sparked by inflation

In its annual budget, Malawi’s government reduced its prediction for economic growth this year on Friday, amid protests over price increases in major towns.

Mostly street vendors, the protesters blame the government for not controlling double-digit inflation, which they claim is driving them out of business.

As their protests have expanded from the capital Lilongwe to the major business hub Blantyre, unemployed youngsters dissatisfied with President Lazarus Chakwera’s administration have joined them on the streets.

The donor-dependent Southern African nation’s economy is predicted to increase 3.2% in 2025, according to Finance Minister Simplex Chithyola Banda’s budget address. This is a decrease from the 4.0% growth estimated in December.

A severe regional drought that hurt agricultural output, the backbone of the economy, caused last year’s growth to be projected at 1.8%.

With chronic shortages of foreign exchange that have reduced imports of essential products like fuel and fertilizer and created a booming black market for foreign currency, inflation was 28.5% year over year (MWCPIY=ECI) when the new month began in January.

By increasing output in industries that could generate dollars, including as mining, tourism, and agriculture, the government aimed to alleviate the currency shortages, according to Banda.

He said that a national anti-crime team would be established to combat the foreign exchange black market.

The budget deficit for the current fiscal year is projected to be 9.6% of GDP, while the deficit for the following year is projected to be 9.5% of GDP.

The government is still working to conclude debt-restructuring talks, and as of September 2024, public debt was approximately 86% of GDP.

“Government in principle has reached agreements with all official bilateral creditors and is still negotiating with commercial creditors to restructure debt,” added Banda.

“Once the negotiations are completed, the initiative will ease the pressure on foreign exchange and provide fiscal space necessary for productive investment.”