When Vision Outpaces Data: Dual Model Forecasts of Malawi's Path to Lower Middle Income Status by 2030
DOI:
https://doi.org/10.59976/jebin.v4i1.349Keywords:
Economic Forecasting, Lower-Middle-Income Status, VAR, DSGE, Structural BreakAbstract
Malawi's First Ten Year Implementation Plan aims to lift the country from low income to lower middle income status by 2030, but ongoing inflation, a weakening currency, slow growth in income per person, and repeated economic shocks make this goal look doubtful. This study checks whether Malawi can actually reach that 2030 income target if its current economic path continues. Yearly economic data from 1990 to 2024, along with a shorter set of data from 2005 to 2024 taken after a major shift in the economy, were studied using two forecasting models, a Vector Autoregression (VAR) model and a Dynamic Stochastic General Equilibrium (DSGE) model built for a small open economy. Statistical tests called Chow and CUSUM show that the economy went through a period of instability around 2001 to 2002, and further checks confirm that the models produce reliable and stable results. The forecasts show that Malawi's total economic output in 2030 will likely fall between seventeen point six and twenty three point one billion US dollars using the longer data set, and between fifteen point four and sixteen billion dollars using the shorter one. In every version of the model, income per person is expected to reach only around six hundred thirty seven to nine hundred fifty six dollars, still below the one thousand one hundred seventy six dollar mark needed for lower middle income status. The two models agree most closely when using the shorter, more recent data set, pointing to a more trustworthy estimate of about six hundred thirty seven to six hundred sixty three dollars per person by 2030. These results suggest that Malawi is unlikely to reach lower middle income status by 2030 unless there is a major change from its past growth pattern. This study adds value by comparing two very different types of forecasting models across two time periods, and it points to the need for steady real growth, lower inflation, a more stable currency, more varied exports, and changes that make the economy more productive.
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Copyright (c) 2026 Chikondi Banda, Thoko Mbewe, Blessings Phiri, Memory Nyirenda, Kelvin Gondwe
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