December inflation slows to 25.4%

Malawi’s inflation rate for December 2022 eased by a paltry 0.4 percentage points to 25.4 percent from 25.8 percent the previous month due to easing of food prices, the National Statistical Office (NSO) data shows.

The inflation rate as measured by the Consumer Price Index (CPI) shows that the annual headline inflation rate for 2022 stood at 21 percent compared to 9.3 percent in 2021.

At 21 percent, the annual inflation target is, however, within the fiscal and monetary authorities’ inflation rate target as projected annual inflation rate was at 23.2 percent and 21.5 percent in the year, respectively.

Based on the annual average figures, it means that prices of goods and services in 2022 were way higher compared to 2021.

However, the data shows that in December, food inflation declined by 2.1 percentage points to 31.3 percent from 33.4 percent recorded the previous month.

Non-food inflation, on the other hand, slightly rose to 18.6 percent from 17.7 percent recorded in November.

In an interview yesterday, economist Edward Chilima observed that it is expected for the inflation rate to continue to decline.

However, he was quick to mention that prices of most commodities would continue to increase  but at  a decelarating due to imported inflation.

Said Chilima: “There has been a stabilisation of maize prices over the month although it is still high. Some of the causes of the maize price increase were speculative and with time, sanity is creeping, which explains stabilisation of the increases.

“We are also heading to a period where food options are available given the rainy season; hence, expected decline or stabilisation in food prices to some extent. Assuming stability of the local currency, and assuming no new external shocks, we should expect the food-driven inflation rate to continue to decline.”

However, in an earlier interview, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni observed that inflation may remain elevated.

He said: “We should expect that we will have an environment where interest rates are relatively high and 2023 may not be a wonderful year in terms of stability if we don’t do what is required.”

During the year, year-on-year headline inflation rate has been on the rise, moving from 12.1 percent in January to 13 percent in February, 14.1 percent in March, 15.7 percent in April, 19.1 percent in May and 23.5 percent in June.

The year-on-year inflation kept rising to 24.6 percent in July, 25.5 percent in August, 25.9 percent in September and 26.7 percent in October before easing to 25.8 percent in November, according to NSO data.

The upward trajectory of both food and non-food inflation compelled the central bank to tighten monetary policy by increasing the policy rate, the rate at which commercial banks borrow from the central bank, to 18 percent to tame the rising inflation rate.

The decision was meant to reduce money supply in the economy by increasing the cost of borrowing.