CDH Investment Bank Limited says inflation pressures emanating from high food prices could remain high in 2023.
This, the bank said, is due to challenges faced with the implementation of the Affordable Inputs Programme, among others.
Said the bank in its 2022 annual report: “In 2023, inflation pressures could remain high, emanating from high food prices as the implementation of the Affordable Inputs Programme for the 2022/2023 agricultural season faced some challenges, expected increase in electricity tariffs, further depreciation of the kwacha, and prolonged forex shortages, among other factors.
“However, the rate of inflation could slightly slowdown in 2023 as global prices fall.”
Last year, inflationary pressures emanated from both food and non-food factors.
Food inflation rate increased to an average of 26.8 percent in 2022 from 11.2 percent in 2021, while non-food inflation rate increased to an average of 15.1 percent in 2022 from 7.4 percent in 2021.
Resultantly, the rate of inflation increased in 2022 averaging 21 percent, up from the average of 9.3 percent in 2021.
Among others, the investment firm said the rising inflation was due to the Russia-Ukraine invasion which exacerbated the impact of Covid-19 on global supply chains and prices of imported goods, including commodities.
“The 25 percent devaluation of the Kwacha that was effected in May 2022 and prolonged forex shortages added pressure on prices of imports.
“Weather-related shocks reduced agricultural production and electricity generation, leading to high domestic food prices and prices of other non-food items,” added CDH Investment Bank Limited.
Reserve Bank of Malawi projects a decrease in annual average inflation rate from 21 percent in 2022 to 18.2 percent in 2023 while the Economist Intelligence Unit forecasts a rate of 17.3 percent for 2023 owing to the expected fall in imported inflation.
On the other hand, both the International Monetary Fund and the World Bank project a rise in the domestic annual average inflation rate to 22.7 percent.
Meanwhile, Ministry of Agriculture preliminary crop estimates show a projected 360 000 metric tonnes (MT) maize surplus this season with production projected at 3.56 million MT against the national requirement of 3.2 million MT.
However, economist Edward Chilima said while the surplus comes amid a challenging season, it is highly unlikely that maize prices will decline to previous post-harvest prices.
He said food inflationary pressures will remain high, adding that the extent of non-food inflation will determine the resultant level of national inflation.
Maize, as part of the food component, has a huge weight at 45.2 percent in the Consumer Price Index, which is an aggregate basket of goods and services used in computing inflation.
Maize prices have been on the rise, increasing by about 300 percent within a year from an average of K9 500 per 50 kg bag in January last year to about K37 000 per 50 kg this year.