Malawi's private sector limped through 2025 under the weight of a deepening foreign exchange crisis, stubborn inflation and rising operating costs, leaving most firms producing far below capacity and business confidence badly shaken, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has revealed.
In its 2025 Annual Economic Performance and Business Environment Review, the chamber paints a stark picture of an economy where firms survived more by endurance than growth, with foreign exchange (forex) scarcity emerging as the single biggest brake on business activity.
According to an MCCCI business survey, 74.1 percent of firms ranked forex shortages among their top three challenges in 2025, making it the most frequently cited constraint. Inflation followed closely, cited by 70.4 percent, while 55.6 percent pointed to rising input costs.
The impact was not marginal. Only 3.7 percent of businesses said they were not affected by forex shortages at all, while a staggering 63 percent reported being severely and frequently affected, underscoring the scale and persistence of the crisis.
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Factories Running Half-Empty
The forex squeeze translated directly into idle machinery and stalled production lines. The report shows that 51.9 percent of firms operated at below 50 percent capacity, while another 37 percent ran between 50 and 75 percent capacity. This means nearly nine out of every ten businesses were operating below optimal levels, largely because they could not import raw materials, spare parts or intermediate inputs.
"Despite some relative macroeconomic stability compared to 2024, firms continued to operate below capacity due to limited access to foreign currency," MCCCI notes.
Even sectors that showed signs of recovery failed to break the cycle. Although tobacco export volumes improved, export earnings were still insufficient to significantly ease forex constraints, leaving firms unable to plan, price or invest with confidence.
Inflation Still Punishing
While inflation slowed compared to the crisis levels of 2024, it remained punishingly high. MCCCI estimates average inflation at 28.7 percent in 2025, a level that continued to erode household purchasing power and suppress consumer demand.
At the same time, high interest rates tightened credit conditions, choking borrowing and private investment just when firms needed capital to adapt.
The result was a near-standstill in sectors dependent on consumer spending. Wholesale and retail trade grew by just 0.1 percent, effectively flatlining, while transport and storage services underperformed, reflecting weak economic activity across value chains.
Manufacturing Takes a Hit
Manufacturing, often touted as key to economic diversification, suffered another blow. Growth in the sector was revised downward to 1.8 percent from an earlier projection of 2.4 percent, largely due to forex shortages.
MCCCI says manufacturing, construction and agro-processing firms were among the hardest hit, facing production stoppages, longer lead times and growing dependence on the parallel forex market, where currency is more expensive and volatile.
"This significantly increased costs and reduced competitiveness," the chamber observes.
Power, Fuel and Costs Add to the Pain
Beyond forex and inflation, businesses also grappled with prolonged electricity outages, intermittent fuel supply disruptions and escalating operational costs, further squeezing output and profitability throughout the year.
These constraints compounded each other: power cuts slowed production, fuel shortages disrupted logistics, and higher costs fed into already high prices, weakening demand even further.
Slower Growth Than Expected
All this fed into weaker overall economic performance. Real GDP growth for 2025 is projected at 2.7 percent, slightly below the earlier forecast of 2.8 percent, which MCCCI says reflects underperformance across key sectors.
While the difference may appear small, the chamber warns it signals missed growth potential in an economy already struggling to create jobs and reduce poverty.
What Needs to Change
Looking ahead, MCCCI calls for urgent structural fixes rather than short-term firefighting. Key recommendations include:
· Export diversification and value addition to broaden forex sources beyond a narrow range of primary commodities.
· Promotion of export-oriented investment and formal remittance inflows.
· Targeted import substitution, especially in food, energy and basic industrial inputs, to reduce pressure on the balance of payments.
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· A more predictable, investor-friendly business environment, with reduced policy uncertainty and streamlined regulations.
The chamber also urges reforms to improve access to foreign exchange and faster contract enforcement, alongside special support for small and medium-sized enterprises, which it describes as central to job creation and diversification.
Call for Deeper Reforms
Economist Velli Nyirongo argues that 2026 must mark a turning point.
"The government must shift decisively from short-term stabilisation to structural reform," Nyirongo said, calling for reform of the forex regime to support productive sectors.
He also urged stronger fiscal discipline, better public financial management, tougher action on corruption and sustained investment in agriculture transformation, irrigation and agro-processing to address hunger and boost exports.
The MCCCI report leaves little doubt: 2025 was a year in which businesses were slowed not by lack of effort, but by systemic constraints--with foreign exchange scarcity sitting at the centre of Malawi's economic paralysis.
