Govt rules out single digit inflation rate
Secretary to Treasury (ST) Newby Kumwembe has ruled out the possibility of Malawi attaining a single-digit annual average inflation rate in 2014 and 2015.
The admission confirms recent skepticism over the same shared by Blantyre-based investment advisory firm Nico Asset Managers Limited and the Economics Association of Malawi (Ecama).
Kumwembe, however, said that annual average inflation rates in 2014 and 2015 would average 19.6 percent and 11.5 percent respectively.
“Inflation is expected to moderate in 2014 and 2015 to average 19.6 percent and 11.5 percent respectively driven by reduction in food inflation and stabilisation of the exchange rate,” he said in Lilongwe last week during the 2014/15 pre-budget consultations.
The rate of inflation—a measure of how fast prices for goods and services rise over a period of time—averaged 28.3 percent in 2013, failing to reach the single mark as targeted in the former Joyce Banda administration’s Economic Recovery Plan (ERP).
Malawi’s year-on-year headline inflation rate—at 22.5 percent as of June 2014—continues to ease marginally buoyed by the stabilisation of the kwacha and the ease in the prices of food on the market.
The economy last registered a single-digit year-on-year headline inflation rate of 9.8 percent in December 2011 before the economy threw itself back into the double-digit year-on-year inflation lane to record a 10.3 percent headline inflation rate.
Commenting on economic growth, Kumwembe said Malawi’s real gross domestic product (GDP) growth for 2013 was 6.1 percent and economy is projected to grow by 6.3 percent and 5.8 percent in 2014 and 2015 respectively.
He said the main drivers for the growth are agriculture, manufacturing, telecommunications and wholesale and retail trade.
Last month, the International Monetary Fund (IMF) noted that although Malawi’s annual rate of inflation has been decelerating in recent months, the rate remains high and that the pace of disinflation is slower than anticipated.
IMF mission chief Tsidi Tsikata said inflation rate has decelerated at a slower pace than anticipated due to the depreciation of the kwacha, especially in the last quarter of 2013.
“In the early 2014, with the approach of the tobacco season, foreign currency inflows began to increase, strengthening both the level of international reserves and the exchange rate, while food prices moderated with an abundant harvest. Under these influences, the annual rate of inflation resumed a downward trajectory,” he explained.
Economic analysts have argued that the recent increase in electricity tariffs will add further inflationary pressures as the general prices of goods and services rise, creating cost push inflation—caused by extensive increases in the cost of basic goods or services.
