Malawi’s year-on-year inflation rate for October 2020 has increased by 0.4 percentage points to 7.5 percent owing to rising food and non-food prices, published National Statistical Office (NSO) figures showed yesterday.
During the same period last year, headline inflation rate was recorded at 9.6 percent. This means that this year, prices of goods and services are rising at a slower pace.
Food and non-food inflation rates stand at 10.9 and 4.4 percent, respectively.
Reads in part the NSO statement: “The divisions above the 7.5 percent headline inflation rate [year-on-year] for October are; food [10.9 percent] and furnishing and household [9.4 percent]. These divisions are predominant drivers of inflation in Malawi.
“In the non-food category, the three categories with the highest year-on-year inflation for October 2020 are furnishing and households, transportation and miscellaneous with inflation rates [year on year] as 9.4 percent, 7.2 percent and 7.1 percent, respectively.”
Meanwhile, NSO figures indicate that headline inflation has declined from a peak of 11.5 percent in January 2020 to 7.1 percent in September 2020 due to relatively lower food prices compared to 2019.
In an interview yesterday, Ben Kaluwa, an economics professor at Chancellor College—a constituent college of the University of Malawi, observed that with a high proportion of low-income earners having food as their main denominator in their budgets, rising food prices poses threats to inflation targets.
He said that while stable global fuel prices could help ease inflation, its contributions in the consumer price index (CPI)—an aggregate basket for goods and services for computing inflation—is low; hence, imported inflation is not a major drive of the country’s inflation.
Said Kaluwa: “Fuel prices will be easing up during the year, but this mostly affects transport costs. Food is the biggest denominator of inflation in Malawi because a high proportion of low-income earners have food as the major thing in their budget.
“So, imported inflation is important, but is not the major drive of inflation in Malawi. It is thus difficult to meet the inflation target.”
Earlier this month, the Reserve Bank of Malawi (RBM) revised downwards the 2020 inflation forecast to an average 8.6 percent from 9.8 percent projected during the Third Monetary Policy Committee Meeting (MPC) of 2020.
“Meanwhile, non-food inflation has been low and stable, anchored by relatively stable exchange rate and energy prices. In 2021, it is anticipated that inflation will continue to decline,” said RBM Governor Wilson Banda in the MPC statement.
Maize, as part of the food component, impacts the country’s inflation as it has a huge weight at 45.2 percent in the CPI.