From Falling Behind to Catching Up

Despite decades of development efforts supported by significant amounts of foreign aid, Malawi has experienced weak and volatile economic growth performance over a sustained period. The nation's growth remains an outlier even compared to its geographically and demographically similar peers. Moreover, growth has been distributed unequally, with little impact on poverty. Per capita income has improved only minimally in the 50 years since independence, and Malawi has one of the lowest per capita incomes in the world. From Falling Behind to Catching Up: A Country Economic Memorandum for Malawi aims to improve readers' understanding of the puzzle of Malawi's development performance and identify ways for the country to achieve robust growth and stay on a stable growth path that helps the poor. The book places a strong emphasis on assessing Malawi's growth experience since independence from a comparative international perspective. It seeks to benchmark Malawian outcomes on growth, structural change, and transformation against peers and explores possible reasons for divergence from international trends. The book also puts deeper drivers of economic growth at the center of the discussion, looking, in particular, at the institutions and policies that may have affected Malawi's growth outcomes and ones that could help the nation to avoid macroeconomic instability in the future. This book first discusses Malawi's macroeconomic situation and challenges in fiscal management, reviewing and drawing lessons from the instability, slippages, and shocks experienced since independence. Second, itexplores the current state of agricultural markets, given the critical role of this sector in poverty reduction. Third, looking at the factors that may constrain higher growth in the future, challenges in private sector development and job creation are discussed. Building on the analysis of challenges, the book concludes witha summary of policy recommendations to help Malawi to begin catching up with its peers.