MW inflation below Comesa average

In 2012, Malawi’s consumer inflation was one the highest in the Common Market for Eastern and Southern Africa (Comesa) region at 21.4 percent, but since then the country has turned the corner reducing inflation to single digits.

By 2017, Malawi’s inflation had inched downwards to 13.1 percent. This year, at 9.5 percent, Malawi’s inflation rate is below Comesa’s 23.4 percent average, according to a recently published Comesa Harmonised Consumer Price Index (CPI) Monthly News Release.

In a recent interview, the Consumers Association of Malawi (Cama) executive director John Kapito welcomed the low inflation figures and expressed optimism of a continuous drop in inflation in the country.

“It is amazing how inflation has declined over the months, including the lean periods where we had expected that the economy would be under heavy stress.

“We noted that both non-food and food inflation relatively remained stable [this year] despite the slight increase of non-food items, which was a result of the slight kwacha depreciation,” he said.

Malawi is far better off on the inflation table than Zambia (12.1 percent), Ethiopia (19.9 percent), Sudan (54.4 percent) and Zimbabwe (391.7 percent).

At 1.2 percent, Seychelles is the country with the lowest inflation rate in the region.

In the country, Maize is key driver of inflation as it is the main food crop, and as part of the food basket, it contributes about 45.2 percent to the CPI.

For instance, in the third quarter of 2019, food inflation was largely driven up by maize prices which rose to K227 per kilograme (kg) in October 2019 from K130 per kg in the previous year.

This price movement in maize, drove food inflation to 14.2 percent from 13.5 percent in the second quarter of 2019, and 9.9 percent in the corresponding quarter of 2018, according to Reserve Bank of Malawi (RBM) data. Consequently, this pushed up inflation during the review period to 9.3 percent from 9 percent in the second quarter of 2019.

Non-food inflation, on the other hand, has remained remarkably low as it declined further to an average of 5.4 percent in the third quarter of 2019 from 5.5 percent in the previous quarter, largely owing to stability in the exchange rate.

The central bank remains upbeat that inflation will remain in single digits.

“Annual headline inflation projection for 2019 remains at 9 percent,” said RBM Governor Dalitso Kabambe in the bank’s November 2019 Monetary Policy Report.

“However, slightly upgraded risks to food prices suggest that food price developments will dominate the inflation dynamics in the short term. Meanwhile, the non-food inflation is expected to remain stable in the short term,” he said.

In its July 2019 Monthly Economic Report, Nico Asset Managers said in the short to medium term, the maize prices are expected to push the food inflation upwards significantly if no measures are introduced to manage the soaring maize prices especially as we enter the lean period.

Maize production, which accounts for the bulk of the country’s aggregate cereal output, is estimated at about 3.4 million tonnes in 2019, marking a rebound from the reduced output of 2018.

At this level, the maize harvest is 10 percent above the average of the previous five years. n

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