‘Africa’s Pulse’ hails Malawi on inflation

Post was last updated: October 13, 2017

Slowing food inflation in the country and subsequent initiative made by the Reserve Bank of Malawi to cut the policy rate is among contributing factors to easing headline inflation across the sub-Saharan region this year, according to Africa’s Pulse.

Africa’s Pulse is a biannual publication containing an analysis of the near-term macroeconomic outlook for the region. It is produced by the Office of the Chief Economist for the Africa Region of the World Bank.

According to the report, as food price inflation continues to slow, the disinflationary impact from stabilising domestic currencies is expected to push headline inflation in the region further down, encouraging more central banks to adopt a supportive monetary policy stance.

“A sustained slowdown in inflation in Malawi, amid lower growth in the price of food items, prompted the central bank to cut its key interest rate by 400 basis points, to 18 percent, in July,” part of the report reads.

The World Bank has since maintained that sub-Saharan Africa’s Gross Domestic Product (GDP) will strengthen to 2.4 percent this year from 1.3 percent in 2016.

The projection has been based on the region’s largest economies of Nigeria and South Africa that managed to exit a 15-month recession and emerge from two quarters of negative growth respectively.

The projected GDP growth has, however, declined by 0.2 percent when compared to a projection made in a similar report in April this year, which stated that GDP in the sub- Saharan region will grow by 2.6 percent.

The report further attributes the growth to increases in mining output along with a pickup in the agriculture sector that is boosting economic activity in metal exporters GDP growth in non-resource intensive countries, supported by domestic demand.

It, however, notes that the recovery is weak in several important dimensions. Regional per capita output growth is forecast to be negative for the second consecutive year while investment growth remains low and productivity growth continues to decline.

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