Rbm says inflation outlook sketchy

The Reserve Bank of Malawi (RBM) says the country’s inflation outlook is sketchy in view of the impact of Tropical Cyclone Freddy which hit the country this month.

In its February Market Intelligence Report published on Friday, the central bank said on top of the tightening of monetary policy stance, domestic factors, mostly weather-related shocks remain a major risk to the inflation outlook.

Reads the report: “Besides the human cost and widespread disruptions, Cyclone Freddy has worsened the outlook for both inflation and economic activity due to the serious damage caused to crops and infrastructure.” 

The central bank has since hinted that there will be policy consideration and re-look towards both inflation stability and economic recovery.

Following Tropical Cyclone Freddy, which hit the country last week, there has been loss of life and property as well as damanging road infrastructure.

Apart from disrupting water and electricity services, the cyclone also disrupted service delivery and business activities in the country.

Catholic University economics lecturer Hopkins Kawaye in an interview admitted that the damage caused by the Tropical Cyclone Freddy, especially on agricultural produce is a cost to the economy.

“As an agro based economy where if produce is affected in any other way, inflation is definitely affected.It is therefore expected that as crops have been destroyed and economic activities disrupted as well, food prices will go up,” he said.

Agricultural development policy expert Tamani Nkhono-Mvula said an interview yesterday that the cyclone effect will have an impact on inflation. 

He said: “Southern Region is high in the production of crops; hence, the effects of the cyclone will definitely have an impact on inflation as well growth.

“Given that this cyclone is also coming against projections that food production will already be low on several factors, the effects of this are indeed going to have a huge challenge.”

Mvula has since urged authorities to prepare for the worst and consider mitigating factors such as winter cropping to ensure availability of food.

“We also need to ensure that institutions like Agricultural Development and Marketing Corporation and National Food Reserve Agency have enough maize to flood the market,” he said.

Meanwhile, year-on-year inflation rate for February stood at 26.7 percent, a 0.8 percentage point increase from 25.9 percent in January, according to data from the National Statistical Office.