Malawi Inflation falls to 8.6 percent

By William Kumwembe

Malawi’s headline inflation softened by 0.3 percentage points in June to hit 8.6 percent as food prices remained subdued.

In its inflation update released Wednesday, the National Statistical Office (NSO) said nonfood inflation was seen at 8.2 percent, down from 8.4 percent.

Food inflation stood at 9.1 percent, down from 9.5 percent registered in May.

Traditionally, food prices are weak in Malawi from April, when most household harvest their crops onwards and normally pick up between January and March.

Ironically, maize prices are now on an upward spiral, likely to exert pressure on inflation in the months to come.

A snap survey on produce markets in the Southern Region at the beginning of the week revealed that maize was trading at an average of K7,000 per 50 kilogramme (kg) bag from K5,000 per kg in April.

Dean of Social Sciences at the Catholic University, Gilbert Kachamba, said current inflation figures do not reflect the situation on the ground.

He projected that inflation would go up in the months to come as prices of basic commodities including maize are going up.

He warned that the recent hike in fuel prices could equally quicken inflation.

“These are essential products, especially maize, which constitutes a bigger percentage in the consumer basket and, at the rate [we are going], we expect inflation to go up,” Kachamba said.

United Kingdom-based economic think-tank, the Economic Intelligence Unit (EIU) said recently that it sees inflationary pressures forcing monetary authorities to hike the policy rate from the current 16 percent.

In its Second Quarter Country Report for Malawi, EIU said inflation would increase to an average of 12.4 percent in 2018 on the back of a 25 percent electricity tariff hike, higher oil prices and a tightening of local food supplies as a result of a sharp decline in maize output.

However, the Reserve Bank of Malawi (RBM) recently said it targets an inflation rate of five percent in the medium term.

In its July Monetary Policy Report issued last week, RBM said the market expects the annual average inflation for 2018 to be 9.8 percent

“In terms of inflation expectation, preliminary results of the inflation expectations survey conducted in June 2018 show that majority of the market expects headline inflation to continue its downward trend up until third quarter of 2018,” reads the report in part.

Respondents, according to RBM, however, indicated the possibility of heightened inflation pressures in the fourth quarter of 2018, such that inflation is expected.