Economic experts have described the recent decline in inflation as temporary, stressing that it is likely going to increase further in the last quarter of the year.
This follows consumer price indices for September published by the National Statistical Office (NSO) on Tuesday.
According to the figures, inflation eased to 27.8 percent in September, representing a 0.8 percentage point decline from the 28.6 percent recorded in August 2023.
Food and non-food inflation rates were seen at 36.8 percent and 17.2 percent, respectively.
“The national month to month inflation rate for September 2023 stands at 1.5 percent. Food inflation rate is at 1.4 percent while non-food inflation rate is at 1.6 percent. The urban month to month inflation rate is at 1.6 percent. Urban food and non-food inflation rates stand at 1.7 percent and 1.4 percent, respectively. The rural month to month inflation rate is at 1.5 percent. Rural food and non-food inflation rates stand at 1.3 percent and 1.8 percent, respectively,” the NSO stats flash reads.
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In an interview, economist Exley Silumbu said the last quarter of a year in Malawi is towards the lean period, in terms of food availability, and this year is already leaner than last year.
“We should expect food inflation to stay on the high side, if not even higher. Therefore, it is very risky to predict decline in headline inflation given the large weight of food inflation in the headline inflation. Correcting the situation will depend on how large the quantitative interventions of government would be,” Silumbu said.
Another economist Edward Chilima said the development may have been triggered by maize sales by Agricutural Development and Marketing Corporation (Admarc) but the situation may change following the expected closure of the markets.
“Prices are driven by speculation and the recent announcement that Admarc has exhausted its maize stocks and would be closing markets should drive maize prices up and that will definitely reflect on the inflation for the last quarter,” Chilima said.
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Another economist Mike Banda concurred with Chilima, saying there are a lot of factors to consider.
“It is quite tricky and there are so many factors at play; for example, our currency remains fragile and such fragility brings in unpredictability and that makes such projection a bit tricky,” Banda said.
Figures from the International Monetary Fund (IMF) website, the IMF Data Mapper, indicate that the institution sees Malawi’s inflation registering a downward trend in the medium to long-terms, reaching an average of 6.9 percent in 2026.
The data suggest that Malawi’s general increase in prices and fall in the purchasing value of money will average 27.7 percent in 2023, 19.8 percent in 2024, and 12.2 percent in 2025.
The IMF 2023 inflation projection is 1.8 percentage points lower than the recent Reserve Bank of Malawi (RBM)’s outlook, at 29.5 percent.
This means that inflation may stabilise or drop in the remaining months of the year.
In an earlier interview, Economics Association of Malawi Executive Director Frank Chikuta said inflation for 2023 and possibly 2024 should be significantly lower than the average for 2022 because of base effects.
“Prices for 2022 and the most part of 2023 were very high, so one would expect that inflation has picked and, therefore, that prices would not continue rising. From that angle one would expect inflation to come down because of the two factors that it has picked but also that the base to compare with is that of very high prices,” Chikuta said.
