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Inflation projected to hit double digit

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The Reserve Bank of Malawi (RBM) has projected that inflation would hit the double digit band in the last quarter of 2021, averaging 10 percent from an earlier forecast of 9.1 percent.

This is contained in a Monetary Policy Committee (MPC) Report published by the central bank recently.

RBM has attributed the upward revision to impact of the increase in domestic fuel pump prices effected last month, a higher than anticipated rise in maize prices and persistent disruptions to global supply chains.

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The central bank has also revised upwards annual average inflation rate for 2021 to 9.1 percent, 0.3 percentage points from the earlier forecast.

“The 2022 annual average inflation rate has also been revised upwards from 8.2 percent to 8.9 percent. Overall, the Monetary Policy Committee (MPC) noted that inflationary pressures were mounting and that the sources were exogenous and mostly supply side factors.

“However, the forecasts indicated that inflationary pressures could subside in 2022. Members of the MPC also observed that the domestic economy was showing signs of recovery and that there was need to support this development in order to achieve sustainable economic growth that would mitigate the adverse effects of the Covid pandemic, whilst monitoring and managing upside risks to inflation,” the report reads.

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In an interview, economist Collen Kaluwa disputed the projection, claiming it is not a true reflection of the situation in the country.

“Recent price increases have on average been between 20 percent and 50 percent. If we include increases in tariffs for electricity, water and other commodities; it seems that this projection is not a true reflection. I believe inflation should be between 12 percent and 15 percent or there about,” Kaluwa said.

Economics Association of Malawi Executive Director Frank Chikuta said in a separate interview that the inflation rate may not rise beyond the earlier projected figure.

“We have to mind that the 10 percent is only for October, November and December and some of the factors will be reflected in November and December. So if we add in October, we might not go beyond 10 percent; perhaps in February or March inflation may reach 12 percent,” Chikuta said.

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