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Inflation inches up to 9 percent

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By Taonga Sabola:

CATASTROPHIC—Floods

Malawi’s headline inflation inched up by 0.1 percentage points in June 2019 to settle at 9 percent as food prices began to bite.

Despite registering a bumper harvest this year, Malawi has seen early pressure mounting on food prices, partly due to deficits recorded in most Southern Region districts affected by floods caused by Cyclone Idai.

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This has seen the price of maize hovering around K180 per kilogramme (kg), or K9,000 per 50 kg bag, barely four months after harvest.

In an inflation update released Tuesday, Zomba-based National Statistical Office (NSO) says June 2019 headline inflation was 0.4 percentage points higher than the 8.6 percent recorded in June 2018.

It says food inflation was recorded at 13.7 percent in June 2019 while non-food inflation was seen at 5.4 percent.

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Analysts recently warned that the recent fall in the value of the kwacha could fuel inflation which may threaten Malawi’s inflation target for the year.

In its mid-year economic report released on Friday, investment management and advisory firm, Nico Asset Managers, says it expects inflation to ease to around 8 percent at the end of 2019 and gradually converge to 5 percent over the medium term.

“These estimates are predicted upon the continued softening of global oil prices 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 pose major upside risks and may cause the inflation rate to edge up,” the report reads in part.

Reserve Bank of Malawi targets an inflation rate of around 5 percent by 2021, which would help the monetary authorities bring down the policy rate to around 11 percent.

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