Malawi Confederations of Chambers of Commerce and Industry (MCCCI) says the worsening business environment between July and September further weakened the local investment climate, hampering long-term growth and affecting foreign direct investment.
The private sector lobby group has highlighted this in a commentary on the third quarter (Q.3) business environment titled ‘Malawi’s economy faces fragile gains amid persistent structural challenges’.
Among others, the chamber said the economy showed mixed performance in the third quarter (Q3) of 2025, with some encouraging developments overshadowed by deep-rooted vulnerabilities such as foreign exchange scarcity and high inflation rate at 28.2 percent, among others.
Reads part of the commentary: “Seasonal boosts in tobacco and pigeon pea exports, a modest rally on the Malawi Stock Exchange and a temporary rise in foreign exchange reserves offered short-term relief.
“However, these gains remain fragile and unevenly distributed, with key sectors continuing to struggle under the weight of high inflation, foreign exchange shortages and a widening trade gap.”
This commentary comes at a time inflation remains one of the economy’s most pressing issues, with food inflation hovering around 33.7 percent, eroding household purchasing power and stifling consumer demand.
In an interview yesterday, MCCCI chief executive officer Daisy Kambalame said high inflation and economic uncertainty have significantly undermined investor confidence during the quarter, deterring foreign direct investment as entrepreneurs were forced to reassess their investment decisions.
She said: “Entrepreneurs often postpone launching new ventures while established businesses scale back operations to minimise risk.
“In this regard there have been instances where investors have withdrawn their capital entirely, seeking more stable and predictable economic environments in neighbouring countries, which has further weakened the local investment climate and hampers long-term growth.”
During the quarter, the chamber said foreign currency shortages persisted with import cover, deteriorating to under one month of import cover by the end of September, far below the recommended three-month threshold and forcing companies to cut production.
Said Kambalame: “Businesses continue to face significant challenges, particularly in accessing foreign exchange to import raw materials, fuel and pharmaceuticals.
“Larger companies are tapping into capital markets for funding but small and medium enterprises remain disproportionately affected due to limited financing options.”
In a separate interview yesterday, Malawi Union of Micro, Small and Medium Enterprises president James Chiutsi said the hostile business environment has choked operations of small businesses.
He said: “It is true that in the third quarter the economy has not performed well and prices of fuel have gone up. This will simply make inflation worse and for our small businesses, this isa worrisome development.
“We hope that authorities will find ways to resolve the challenges.”
A Blantyre-based manufacturer, speaking on condition of anonymity, said the push for import substitution has been hard as foreign exchange scarcity and high inflation has made their products expensive.
“Consumers are not only poised to promote domestic markets, but they are also looking at costs and we have been beaten several times on this,” said the manufacturer.
Looking ahead, the chamber said the outlook is precarious with existing risks like ongoing foreign exchange shortages, rising inflation and potential climate shocks that could threaten private sector performance.
Meanwhile, MCCCI has stressed that to restore macroeconomic stability, it will require a coordinated policy approach focused on inflation control, fiscal discipline and export diversification.
It said without decisive reforms, Malawi risks backsliding into deeper instability, calling for short-term stabilisation and long-term structural changes.
The Reserve Bank of Malawi earlier cut economic growth for 2025 from 3.2 percent to 2.8 percent citing inflation risks.
