Malawi’s missing economic growth

Lise Rakner, who’s visiting Berkeley from the University of Bergen for the year, recently gave an interesting talk on how competitive elections haven’t done much to improve development outcomes in Malawi.  As a rough measure of this, I compared Malawi’s economic growth since the mid-1980s to its neighbors – Mozambique, Tanzania and Zambia.

GDP Per Cap(Data from the World Bank, via the Google Public Data Explorer. The graph looks different depending on whether you use current dollars or a PPP adjustment, but doesn’t change the fact that Malawi hasn’t grown as fast as the other two since 2000.)

I asked Lise what she attributed these divergent outcomes to, and her hypothesis was natural resources.  This clearly accounts for Zambia’s higher GDP, but doesn’t explain why every country except Malawi saw a steady increase in GDP since 2000.

All four of these countries are considered “partially free” by Freedom House, so it’s not clear that the political environment is substantially worse in Malawi than elsewhere.  They also looked very similar on the World Governance Indicators’ measures of government effectiveness, regulatory quality and rule of law in 2012.  (Look at the error bars on the estimates – they’re all overlapping.)

WGI(Data from WGI.  I didn’t include data from 2000 or earlier to keep the graph easy to read, but they looked fairly similar at that point as well.)

So what’s going on?  I don’t know Malawi at all, so any explanation would be appreciated!

9 thoughts on “Malawi’s missing economic growth

  1. I second Pete above. Malawi’s population has doubled in the last 30 years so the use of a per capita GDP graph to compare against surrounding countries will not present fairly. You need to apply weights to your per capita numbers, remove the skew that is arising from an exceptionally high population growth in Malawi.

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    1. Hmm, I’m not actually sure population growth explains it. Based on World Bank data, it looks like Malawi grew rapidly in the late ’80s, then saw a large decline in growth in the early 1990s, and has been growing at around the same rate as all of its neighbors (3% annually) ever since. The other countries’ economies would still have had to grow much more quickly than Malawi’s in order to achieve the per capita GDP growth rates seen here.

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  2. Just a late addition to the discussion. I’m currently based in Malawi’s Ministry of Agriculture and Food Security. Malawi’s agro-dependent economy is not all that different (in terms of commodities) from its neighbors, particularly landlocked Zambia, and Malawi is far from utilizing a significant portion of its natural resource potential, so I think this would only provide a partial explanation. In my opinion, competitive elections in Malawi have not led to significant economic growth, in part, because it has not led to significant institutional strengthening. One of Malawi’s major weaknesses centers around ineffective and incomplete policy implementation, which has led to poor/inconsistent economic regulation and ineffectively delivery of basic services (power, water, etc.). This, combined with arduous import and export requirements, over-protectionist export bans (Malawi bans the export of maize & maize products, which Zambia has successfully turned into a major cash crop), and an under-developed financial sector, has led to major development stagnation. The country’s agricultural policy and budget, unlike it’s neighbors, is almost completely dominated by an input subsidy program (FISP), which crowds out diversified government investment in the agricultural sector and keeps it running like a social welfare sector instead of a productive sector.

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    1. The Enhanced Integrated Framework (EIF) and WB should be releasing the latest DTIS report soon (http://www.enhancedif.org/en/country-profile/malawi) and it provides a lot of great insights into this question, as well as a great comparison opportunity between the 2012 and 2004 surveys. They also point to weak institutions and poor policy management, which isn’t so much a political problem as a civil service capacity, expertise, and management problem.

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  3. my initial thoughts are all here: no natural resources, no port (the inland port of Nsanje doesn’t count), and very poor economic and democratic governance during the second Bingu term.

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  4. I agree with Pete- Malawi is an agroeconomy based primarily on tobacco exports which is not doing well at all. It is a rainfed economy, very vulnerable to rainfall and experiencing severe draughts at reg intervals. But there is also a political story to this: From 2010-2013 Malawi systematically alianated its foreign donors through high levels of corruption and excessivly governance -and an executive who claimed Malawi could do without donor aid….which at the time accounted for app 40 % of GDP. I am sorry my response in the seminar was somewhat limited, rachel. Thanks for bring this up!

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  5. Simply Malawi, doesn’t have an economy while they do make some money off tea coffee exports they don’t have any natural resources and the birthrate is incredibly high. Tourism accounts for some foreign exchange receipts but compared with their neighbors they don’t have large game parks that but that others can capitalize on. It’s sad because Malawi is a really great country was really great people and really really beautiful freshwater lake but the combination of being landlocked having no resources and having one of the highest birthrates in the world handicaps it the long run.

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