The Economics Intelligence Unit (EIU) is forecasting the Reserve Bank of Malawi (RBM) to maintain a tight monetary policy stance in 2025 despite easing inflation, citing election-induced high government spending, among others.
In its March 2025 economic forecast quoted in March 2023 Nico Asset Managers Monthly Economic Report, the global think-tank projects that later in 2027, the policy rate could drop to 18 percent from the current 26 percent.
The firm notes that inflationary headwinds will continue to linger, arising from fiscal slippages, local currency weakness due to exchange-rate liberalisation, increases in electricity tariffs, and higher government expenditure due to the general elections in 2025.
“These factors will compel the RBM to maintain a tight monetary policy in 2025 but will likely initiate cuts to the policy rate in 2026-27 as inflation falls toward the target and support growth,” reads the report in part.
In an interview yesterday, Consumers Association of Malawi executive director John Kapito said rising inflation is hurting a majority of people and the economy.
Meanwhile, Nico Asset Managers highlighted in its monthly economic report for March that rising interest rates may result in a slowdown of inflation due to a decrease in consumption spending.
It says: “However, this will be at the cost of rising costs of borrowing which will hamper investments in the real economy and hinder economic growth.”
