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.
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.
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“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.
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, 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. 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.
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