Headline inflation— the rate at which commodity prices change in an economy at a given period—went down in June to 27.3 percent from 29.2 percent in the preceding month, thanks to an ease in food prices.
Figures from National Statistical Office (NSO) show that food inflation went down during the month under review to 37.2 percent from 37.9 percent. Non-food inflation for June stood at 16.0 percent from 18.4 percent.
In the past 24 months, inflation has been on an upward spiral, pilling pressure on most other macroeconomic fundamentals as the cost of living remains elevated.
In a desperate attempt to tame run-away inflation, RBM adopted a tight monetary policy where, among other things, it adjusted its policy rate to 22 percent in May.
In an interview Thursday, Centre for Social Concern Programmes Coordinator responsible for economic governance Bernard Mphepo said the lowering food prices have helped in containing inflationary pressure.
“Basically, the going down of inflation was because of the lowering down of food inflation. We are all aware that we are still in the harvesting period; so that is why we had that drop in inflation.
“However, the cost of living remained high, meaning that Malawians are still to getting basic needs at a higher price,” Mphepo said.
In its 2nd Quarter Malawi Country Report issued recently, global economic think-tank, the Economist Intelligence Unit (EIU) predicted Malawi’s headline inflation to average 30.6 percent in 2023.
The projection is 10.6 percentage points higher than the earlier projection of 21 percent.
The forecast is also higher than the revised 24.5 percent by the Reserve Bank of Malawi (RBM) from the earlier projection of 18 percent.
Year-on-year inflation in the first quarter of 2023 averaged 26.5 percent.
EIU says Malawi’s foreign currency shortages are making imports of food and fuel costly and could prompt currency devaluation, which will drive up inflationary pressure.
It says from 2024 onwards, there would be decline in commodity prices and improved availability of foreign currency to import food and fuel, which would lead to a fall in inflation.
EIU says lower input costs and increased fiscal discipline, which will reduce deficit financing through money printing, will also keep inflation contained going forward.
In its May 2023 Market Intelligence Report, the central bank hinted at maintaining a tight monetary policy stance and said there are a lot of factors that threaten inflation rate stability.
The report indicated that prevailing high food prices are a cause for concern, as they could delay the disinflation process.
“The slow progress on inflation means that monetary policy may be needed to remain tight for an extended period of time. The RBM will therefore continue to monitor developments closely and stand ready to act, as and when appropriate,” the report reads.