Malawi’s savings rate lowest, shows analysis

Malawi’s savings rate at  11 percent is one of the lowest in the world and below the Sadc region’s 25 percent threshold, published World Bank data shows. 

The data, contained in a recent World Bank investment analysis for Malawi, shows that   the country’s peers invested more than 2.5 times their output, supporting considerably stronger growth.

Economists say the lower savings rate is an indication that the economy is spending much on consumption than investments, which implies deprived growth opportunity.

Reads the analysis in part: “Structural peers tended to save more than Malawi, which experienced a rapid deceleration of savings since the onset of the Covid-19 pandemic.

“This is driven by high levels of government consumption and limited household and commercial saving.”

The World Bank notes that Malawi’s investment rates have been chronically low with the exception of two brief investment booms immediately following democratisation and in the post-Heavily Indebted Poor Countries Initiative  years.

Economists say a drop in savings rate portrays reduced investment for the future, which also reduces growth of output, wages and living standards.

Economist Gilbert Kachamba said in an interview yesterday that while a lower savings rate might hinder the country’s ability to invest in critical sectors such as infrastructure, education and healthcare, it can also make the economy more vulnerable to external shocks as there might be fewer buffers to absorb economic downturns.

Reserve Bank of Malawi Governor Wilson Banda is on record as having said that Malawi is performing poorly in gross domestic savings, adding that to accumulate significant saving, one should deliberately develop short, medium and long-term financial goals and budget towards achieving them.