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Economic Intelligence Unit sees inflation averaging 13.8%

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The Economic Intelligence Unit (EIU) says it expects Malawi headline inflation to average 13.8 percent in 2017 before decelerating to 9.9 percent in 2018.

Quoting the EIU in its monthly economic report, investment management and advisory firm, Nico Asset Managers, however, says a potential decrease in maize availability during this year’s lean season may still lead to food inflationary pressures in the coming months.

The Nico Asset Managers report says several risks such as demand for wage increases, transport cost increases and housing cost increases will remain prevalent and may further lead to non-food inflationary pressures.

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However, the inflationary pressures will ease gradually from 2018 onwards to single digits after a normalisation of food production.

In the recent past, headline inflation has remained subdued due to the continued slowdown in food prices and softer global oil prices.

The Reserve Bank of Malawi (RBM) has forecast inflation to reach a target of 12.3 percent or below by December 2017.

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In its fifth Monetary Policy Statement, the central bank said the inflation outlook remains broadly positive following the good agriculture season.

“As is usually the case, this will also have positive spillover effects to the non-food inflation,” said RBM.

However, RBM also conceded that the outlook is subject to some negative risks which include weaker global demand which could lead to lower prices for Malawi’s export commodities and an eventual pressure on the kwacha.

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