Inflation outlook still hazy
More economic experts are predicting that volatility in the economy and the challenges the situation presents will make it difficult for the country to achieve its targets on taming inflation in line with the 21 percent annual inflation target as set by the Reserve Bank of Malawi.
Inflation rose to 23.5 percent in July 2016, a jump of 0.9 percentage points from the June inflation of 22.6 percent.
The National Statistical Office attributed the development to an increase in food inflation which jumped 1.5 percentage points to 29.2 percent in July from 27.7 percent in June.
Ironically, the Reserve Bank of Malawi (RBM) predicted at its recent Monetary Policy Committee Meeting that Malawi may attain single digit inflation by 2018, with the outturn for December 2016 maintained at 25.4 percent.
The central bank, however, concedes that the current outturn has been exacerbated by high food inflation.
Economic experts fear this may continue to weigh negatively on the outlook of overall inflation, especially in the second half of the year and the years to come, eventually frustrating the set targets.
Malawi Economic Justice Network (Mejn) Executive Director, Dalitso Kubalasa, said in an interview that considering the prevailing economic challenges, any hope of taming the runaway inflation remains a farfetched dream.
Kubalasa said the operating environment remains challenging and that unless authorities change their approach in fiscal management and the country improves its production base, Malawi will continue to report high inflation in the months to come.
“That is inflation being managed, other than just some of these textbook theories, let’s focus a little more on the practical side and make sure that economic agents understand that and play their part,” said Kubalasa.
He further suggested that government must tame its appetite for borrowing and cut unnecessary expenditure to put the economy on a recovery path which would in the short to medium terms bring down inflation levels.
“There are some debts that we are getting into that we should be avoiding. We must address fiscal slippages if at all we want to see stability in some of the key fundamentals going forward.”
In a separate interview, another economic commentator, Nelson Mkandawire, said unless Malawi heeds calls to diversify its food production base, food inflation will continue to impact on the overall inflation outlook.
“Single digit inflation is achievable but taming inflation is largely dependent on food availability and taming government expenditure. Missing these two critical aspects means inflation will continue to be high,” said Mkandawire.