Inflation target revised upwards – The Times Group Malawi

Post was last updated: August 5, 2019

By William Kumwembe:

Reserve Bank of Malawi (RBM) has revised upwards 2019 annual inflation projection from eight percent to nine percent owing to elevated maize prices.

In its Monetary Policy Committee (MPC) Report issued last week, RBM however, says this is temporary and will likely “unwind in the near term.”

Inflation picked up in the second quarter of 2019 to 9 percent from 8.7 percent recorded in the previous quarter.

“The increase was largely on the account of food price developments,” reads the MPC report.

Food inflation averaged 13.5 percent in the second quarter from 11.9 percent in the first quarter propelled by high maize prices.

Maize prices have been on an upwards spiral in the past weeks, a development commentators has blamed on speculation.

Spot checks in some selected produce markets in the country’s major cities of Lilongwe, Blantyre, Zomba and Mzuzu show that a 50 kilogramme bag is now selling at between K9 500 and K10 500 from K8 500 early July.

As part of the food component, Maize-the country’s staple food-impacts the country’s economy as it accounts for 45.2 percent in the consumer price index, an aggregate basket of goods and services for computing inflation.

This year ’s maize surplus was estimated at 355 000 metric tonnes (MT) out of a total output of 3.3 million MT.

In June 2019, inflation inched up by 0.1 percentage points to settle at 9 percent as food prices began to bite.

Food inflation remains elevated and averaged 13.5 percent in the second quarter of 2019, which is 4.0 percentage points and 1.6 percentage points higher than 9.5 percent and 11.9 percent recorded in the second quarter of 2018 and first quarter of 2019, respectively.

The average food inflation for the first half of 2019 is recorded at 12.7 percent which is again higher than 9.0 percent recorded in the first half of 2018.

However, non-food inflation remains well anchored according to RBM.

“Inflation remains anchored in single digit and averaged 9.0 percent in 2019Q2, which is 0.1 percentage points lower than 9.1 percent recorded in 2018Q2, but 0.3 percentage points higher than 8.7 percent recorded in 2019Q1,” reads the report.

Average inflation for the first half of 2019 is 8.8 percent and is similar to the average for the first half of 2018.

Meanwhile, RBM says economic activity is projected to rebound in 2019 after slowing down in 2018.

The recovery is premised on improvement in both agriculture and non-agriculture sectors.

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