Nico Asset Managerssees rising inflation

Investment management and advisory firm Nico Asset Managers Limited has said the inflation outlook shows prices of goods and services will rise at a faster pace in the short to medium-term.

In its November monthly economic report, the firm says this is despite other factors suggesting a relatively lower inflation trajectory compared to the inflation outlook reported during the third Monetary Policy Committee (MPC) meeting of 2023.

Reads the report in part: “Inflation figures for December are expected to be higher, better reflecting the uptick in prices on account of the devaluation.

“Upside risks to inflation remain, largely arising from the depreciating currency affecting domestic prices, owing to the protracted foreign exchange supply challenges and the result of El Niño weather patterns which are expected to negatively impact the prices of food.”

According to the Reserve Bank of Malawi, the 2023 headline inflation rate is projected at 28.2 percent, 1.3 percentage points lower than the 29.5 percent forecast during the previous MPC meeting.

Meanwhile, Malawi’s year-on-year headline inflation rate for 11 months to November 2023 has averaged 28.2 percent, with November inflation picking up to 33.1 percent.

Consumers Association of Malawi executive director John Kapito said increase in the inflation rate has been worsened by the 44 percent kwacha devaluation.

“The rise in inflation continues to erode people’s purchasing and will consequently affect their disposable income,” he said.

RBM spokesperson Mark Lungu earlier indicated that the 2023 inflation average may not be affected much by the devaluation of the kwacha.

He said: “Monetary policy stance will be determined at the next MPC meeting [in January] and that is where new inflation projections will be discussed.”

Inflation has been on the rise in recent months largely due to increases in prices of food and non-food items.