The persistent inflation pressure can have a spillover effect on the 16-counter Malawi Stock Exchange (MSE) if not contained.
Since last year, headline inflation rate has been rising, hitting a double digit band in November 2021. It is expect to shoot further in the short to medium terms.
According to MSE Chief Operating Officer Kelline Kanyangala, a further elevated inflation would affect performance of most listed companies and influence decisions of investors.
Kanyangala added that due to a rise in inflation, the cost of production rises, products may lose the market due to an increase in prices and if inflation results in interest rates rise, most fund managers would offload the shares at a lower price.
“We are confident, however, that the policy direction will encourage economic growth. Therefore, it gives us confidence that the monitory policy stance will help in containing risks such as inflation pressure,” she said.
In December 2021, headline inflation was recorded at 11.5 percent from 11.1 percent in November last year and 7.6 percent in December 2020.
The increase was on account of the rise in food inflation which accelerated to 13.6 percent from 12.8 percent over the same period.
The Malawi Confederation of Chambers of Commerce and Industry January Economic Review cites rising inflation among key risks threatening economic growth chances.
While the Ministry of Finance is expected to address the country on how government will control inflation on the demand side through the national budget, Reserve Bank of Malawi says it remains committed to arresting inflation in medium term.
“The sources (of inflation) were deemed transitory and likely to dissipate as the lean period ends. On the other hand, the committee noted that the domestic economy is still in recovery and, therefore, requiring policy support to reach the stable path,” reads a monitory policy report from RBM.
Inflation has been rising across the globe as economies stagger from the economic effects of the Covid pandemic.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.