Inflation slows down to 8.8%

Post was last updated: February 21, 2019

By William Kumwembe:

Malawi’s headline inflation as measured by the Consumer Price Index (CPI) went down in January 2019 to 8.8 percent from 9.9 percent registered in December 2018.

Figures which National Statistical Office (NSO) released Wednesday show that, despite the significant month-on-month drop in inflation, the rate is 0.7 percentage points higher than that recorded in January 2018.

Food inflation went down to 10.7 percent in January 2019 from 12.0 percent recorded in December 2018.

Non-food inflation also went down from 8.2 percent in December 2018 to 7.1 percent.

The non-food inflation drop was partly influenced by downward adjustments of fuel prices for two months in a row.

Ironically, although inflation fell back-to-back for two months, there are fears from the food market where prices of the staple food, maize, are under intense pressure with the lean season now at its peak.

A 50 kilogramme (kg) bag of maize is selling at an average price of K10,000 in Blantyre, up from K7,500 in November.

But State-owned grain marketer, the Agricultural Development and Marketing Corporation (Admarc), recently said Malawians should not panic during the lean period as it has enough maize at a price of K7,500 per 50kg bag.

Short queues were seen at some Admarc markets yesterday in some places in Malawi’s commercial city, Blantyre, where consumers waited for a turn to purchase the staple commodity.

In its 2018 Annual Economic Report, Nico Asset Managers says, as Malawi approaches maize harvest season, food prices are expected to start declining.

“This will ease the food inflationary pressures. The rainfall pattern will continue affecting the agricultural sector performance and, inevitably, inflation in 2019.

“A good rainfall pattern results in a sufficient and increased agricultural production. This will assist in relieving some inflationary pressures,” Nico Asset Managers says.

However, some commentators have warned that inflation could come under pressure in the first half of the year due to spending associated with the May 21 elections.

Earlier, an economic commentator and lecturer at ATC, Sam Chiwaula, warned of a continued volatility in inflation in the short to medium terms.

“This will be compounded by an increase in money supply resulting from the tripitite elections, thereby increasing aggregate demand for essential goods and services, which in turn will see inflation rising further,” Chiwaula said.

But monetary authorities said they expect the headline inflation to hit average 9.3 percent in the first quarter of 2019.

In its latest Monetary Policy report, the Reserve Bank of Malawi predicted headline inflation to hit average nine percent in the second quarter.

The predictions are 0.7 percentage points and 1.0 percentage points lower than what was predicted during the previous Monetary Policy Committee meeting.

The Economist Intelligence Unit has predicted Malawi’s annual inflation to average 8.9 percent in 2019.

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