For four years running, Malawi’s gross fixed capital investment, a measure of the net additions to a country’s fixed assets, has contracted, a development commentators say points to failure to support future production and economic growth.
The World Bank says the gross fixed capital investment, intended for use in production for more than one year, includes items such as machinery, equipment and structures as well as land improvements.
Published World Bank data show that, as a percentage of the gross domestic product (GDP), the country’s gross fixed capital investment has shrunk from 0.8 percent in 2020 to negative 0.2 percent in 2021, negative 6.5 percent in 2022, negative 14.3 percent in 2023 and negative 14.2 percent in 2024.
The World Bank also projects the gross fixed capital investment to contract further in 2025, at negative 11.6 percent, before peaking to negative 25.1 percent in 2026 and negative 33.8 percent in 2027.
This is far from the region’s average of 22.2 percent.
A market analyst, speaking anonymously on Tuesday, observed that the continued fall in gross fixed capital investment shows that Malawi is underinvesting in the infrastructure, machinery and capacity needed for future growth.
Said the analyst: “This undermines long-term productivity, limits job creation and weakens the country’s ability to meet its development aspirations.
“Without reversing this trend, the economy risks remaining trapped in low growth and deepening poverty.”
On his part, Scotland-based Malawian economist Velli Nyirongo said in an interview on Tuesday that this points to a significant reduction in spending on infrastructure, machinery and other productive assets.
He said: “This trend is worrying for Malawi’s future, as such investment is crucial for driving long-term economic growth, improving productivity and creating jobs.
“Without sufficient investment, the country risks falling behind in development.”
Nyirongo noted that the substantial reductions have mainly resulted from unstable economic environment, characterised by high inflation, currency volatility and elevated interest rates, making long-term investments more risky and less attractive.
The World Bank indicates that majority of investments in Malawi come from domestic savings, which have been low, driven by high levels of government consumption and limited household and commercial savings.
At 11 percent, the savings rate is one of the lowest in the world and below the Southern African Development Community’s 25 percent threshold.
At the same time, private consumption has risen from 0.6 percent in 2022 to 5.6 percent in 2027, suggesting that household spending is expected to grow while government consumption has registered a sharp rebound from -5.8 percent in 2022 to 2.5 percent in 2027, indicating volatility in government spending.
Economists say the lower savings rate is an indication that the economy is spending much on consumption than investments.
Currently, Malawi has embarked on a journey to become a lower middle-income economy by 2030 and an upper middle income economy by 2063 in line with aspiration outlined in Malawi 2063, the country’s long-term development plan.
