This Country Climate and Development Report aims to support Malawi's efforts to achieve its development goals within a changing climate by quantifying the impacts of climate change on the economy and highlighting key policies and interventions that are needed to strengthen climate resilience. The analysis includes climate modeling across multiple scenarios to account for the inherent uncertainty in climate projections; and sector-by-sector analysis and assessment of economywide impacts to identify the biggest impacts. It examines Malawi's current policy landscape and identifies needed reforms; considers how Malawi can best protect its most vulnerable households; and considers how the country can finance its ambitious development and climate agenda, including the key role of the private sector. The analysis shows that climate change will impose large costs on the economy and on already vulnerable households. If Malawi stays on its current low-growth development trajectory, climate change could reduce GDP by 3-9 percent in 2030, 6-20 percent in 2040, and 8-16 percent by 2050). The analysis also clearly demonstrates that development, as set out in Malawi's Vision 2063, provides a strong basis for strengthening resilience to climate impacts. If Malawi was to accelerate implementation of policies and programs envisioned in the Vision 2063 the development trajectory would shift to a higher growth path and climate change impacts would be significantly reduced. But the Vision 2063 development path will not be enough and building greater resilience to climate change will require doing different things and doing things differently. With additional adaptation measures, the analysis shows that not only is the impact of climate change on GDP much smaller, GDP is higher with climate change and adaptation when compared to the counterfactual with no climate impacts; losses range from -1 to 3 percent in 2030 and 2040, and 1 to 4 percent in 2050.

Ending poverty and stabilizing climate change will be two unprecedented global achievements and two major steps toward sustainable development. But the two objectives cannot be considered in isolation: they need to be jointly tackled through an integrated strategy. This report brings together those two objectives and explores how they can more easily be achieved if considered together. It examines the potential impact of climate change and climate policies on poverty reduction. It also provides guidance on how to create a “win-win†? situation so that climate change policies contribute to poverty reduction and poverty-reduction policies contribute to climate change mitigation and resilience building. The key finding of the report is that climate change represents a significant obstacle to the sustained eradication of poverty, but future impacts on poverty are determined by policy choices: rapid, inclusive, and climate-informed development can prevent most short-term impacts whereas immediate pro-poor, emissions-reduction policies can drastically limit long-term ones.

South Asia is expected to continue to be the fastest-growing emerging market and developing economy (EMDE) region over the next two years. This is largely thanks to robust growth in India, but growth is also expected to pick up in most other South Asian economies. However, growth in the near-term is more reliant on the public sector than elsewhere, whereas private investment, in particular, continues to be weak. Efforts to rein in elevated debt, borrowing costs, and fiscal deficits may eventually weigh on growth and limit governments' ability to respond to increasingly frequent climate shocks. Yet, the provision of public goods is among the most effective strategies for climate adaptation. This is especially the case for households and farms, which tend to rely on shifting their efforts to non-agricultural jobs. These strategies are less effective forms of climate adaptation, in part because opportunities to move out of agriculture are limited by the region’s below-average employment ratios in the non-agricultural sector and for women. Because employment growth is falling short of working-age population growth, the region fails to fully capitalize on its demographic dividend. Vibrant, competitive firms are key to unlocking the demographic dividend, robust private investment, and workers’ ability to move out of agriculture. A range of policies could spur firm growth, including improved business climates and institutions, the removal of financial sector restrictions, and greater openness to trade and capital flows.

This report provides an assessment of how governments can generate inclusive economic growth in the short term, while making progress towards climate goals to secure sustainable long-term growth. It describes the development pathways required to meet the Paris Agreement objectives.