By William Kumwembe:
Malawi’s headline inflation eased by 0.2 percentage points in May 2019 to 8.9 percent from 9.1 percent, figures from National Statistical Office (NSO) have shown.
NSO has attributed the easing in headline inflation to a drop in food inflation.
According to NSO, food inflation was recorded at 13 percent in May, down from 13.8 percent in April while non-food inflation stood at 5.7 percent, up from 5.4 percent in April.
Maize, Malawi’s staple food, constitutes 45.2 percent in the consumer price index, an aggregate basket of goods and services for computing inflation.
The second round agriculture production estimates shows a surplus of 355 232 metric tonnes (MT) of maize.
The drop in headline inflation comes at a time the kwacha continues to lose valuable ground against the dollar, a development analysts believe would fuel imported inflation.
Reserve Bank of Malawi (RBM) Director of Communication and Protocol, Mbane Ngwira, said the fall in inflation was expected as they had noted earlier that the harvesting period and the bumper maize yield was going to have a decelerating impact on inflation.
“However, recent depreciation of the kwacha had an opposing effect. As we consolidate our foreign exchange reserves and stability of the kwacha, we expect inflation to continue falling and converging to our medium term target of five percent,” Ngwira said.
In its May 2019 economic report released Tuesday, Nico Asset Managers, says inflation is expected to ease to around 8 percent at the end of 2019 and gradually converge to five percent over the medium term.
“These estimates are predicated upon the continued softening of global oil prices, favourable rains and higher agricultural output and controlled government spending.
“However, adverse weather, pest-related disruptions to crop production and a sharper than expected depreciation of the kwacha, an increase in the global oil prices pose major upside risks and may cause the inflation rate to edge up,” Nico says.
The firm says the lower inflation rates may lead to reduced interest rates which could increase private sector investments and disposable income for expenditure.
“Alternatively, high inflation rates raise the cost of investment thereby hampering private sector growth,” the firm says.
Latest statistics from welfare monitoring body, the Centre for Social Concern (CfSC) show that cumulatively, cost of food increased by 12 percent between January 2018 and April 2019.
Cost of non-food items went up by nine percent during the period under review.
This resulted in a 10 percent rise in the overall cost of living over the 15-month period.
CfSC said average levels of income for most Malawians fall below half of their living requirements as they earned less than K100,000 per month.
It further said lack of adequate income is the denial of a good psychological environment at home to support family needs, leading to poor nutrition.