Double-digit inflation looms—economists
Economists say inflation rate could slip into double digit, reversing all macroeconomic gains registered in recent years and trigger continued rise in prices of goods and services.
The prediction is premised on the continued rise in the prices of food, particularly maize, which may trigger a rise in food inflation and could worsen further between now and the next harvest next year.
Despite non-food inflation being stable, the economists argue that it could also go up largely due to the impact of the recent fuel price hike.
University of Malawi’s Chancellor College economics professor Ben Kaluwa, in an interview yesterday, said his prediction is based on the fact that the country’s inflation is anchored by food.
He said: “At this time, we have already sold our tobacco and we are left with maize and few other crops.
“This is November and my prediction is that in few weeks time within this year, we may fall into double digit inflation.”
Kaluwa said the rise in inflation rate will likely affect the policy rate and commercial bank interest rates.
“When we fall into double digit, eventually the policy rate will have to go up above inflation rate and trigger increase in commercial bank interest rates.
“However, the rise in interest rates may not be significant compared to recent years when they were too high,” he said.
National Statistical Office (NSO) figures released this week show that Malawi’s year-on-year headline inflation for October 2019 quickened by 0.4 percentage points to 9.6 percent, pushed up by the rise in prices of food, particularly maize.
The rate at which prices of goods and services are rising was at 9.2 percent the previous month.
The October inflation rate is 0.1 percentage points down compared to 9.7 percent registered during the same period last year, according to NSO.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe, in an interview yesterday, said it is a predictable trend that during the lean period, inflation goes up and when the nation has bumper yields, it goes down.
“It depends on how we manage it going forward. We now have forward-looking monetary policy framework, which predicts inflation decline ahead, which is contrary to the previous situation when monetary policy would react to inflation where interest rates could be adjusted immediately,” he said, adding that double digit inflation is likely in the coming weeks.
Reserve Bank of Malawi Governor Dalitso Kabambe on Monday remained optimistic that the single digit inflation rate may be sustained if maize prices do not continue to rise.
“Our view is that the inflation rate is still within the single digit mark. Of course, maize prices have gone up because of the lean season and harvest deficit that we had,” he said.
The Famine Early Warning System Network (FewsNet) in its recent report indicated that food prices are above average throughout the country due to below-average supply in most markets.
