Malawi’s inflation rate moves away from Comesa average

Malawi’s inflation rate slightly moved away from the Comesa rate in November 2014, while the trade bloc’s average slowed down, a situation that could taint the country’s business environment.

The Common Market for Eastern and Southern Africa (Comesa) Harmonised Consumer Price Index (HCPI) released this month, shows that Malawi’s inflation rate rose to 24.3 percent in November from 23.7 percent the month before.

In the same period, the region’s average slowed down from 12.5 percent to 10.5 percent.

Malawi’s Comesa HCPI year-on-year increased the highest, rising by 4.3 percent, according to Comesa.

Regardless of this situation, Malawi’s inflation rate in November 2014 remained the second highest in the region after Sudan’s 29.1 percent, which fell from 31.8 percent in the previous month.

Analysts have cautioned that Malawi’s high inflation rate, which started rising after the liberalisation and floatation of the kwacha in May 2012 is bad for both businesses and quality of life.

Since the policy change, which also included the automation of fuel prices and electricity tariffs, inflation peaked at 37.9 percent in February 2013 and averaged 28.6 percent in 2013.

According to National Statistical Office (NSO) figures, the 2014 average fell to 24.8 percent after the December rate rose to 24.2 percent from 23.7 percent in November 2014, pushed up by both food and non-food items.

Analysts have often blamed the country’s high inflation rate for slowing down the attraction of foreign direct investment (FDI).

But monetary and fiscal authorities have often argued that although the country’s inflation rate stands out in the region, other economies have also passed through similar rates after their liberalisation, noting that the country will also enjoy lower inflation rates in the near future.

Future outlook based on a number of analyses and projections show that inflation is expected to slow down in the long-term.

Economist Intelligence Unit (EIU) expects inflation rate for Malawi to moderate to an average of 8.9 percent between 2015 and 2017 due to increased productivity and easing food prices.

In the short-term, due to the appreciating kwacha, which has been gaining ground since mid-December last year and a cut on fuel prices, inflation rate is expected to slow down.

Malawi Energy Regulatory Authority (Mera) effected a 10 percent price cut in January, a development which may have a lagged positive effect on inflation, according to analysts.