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Inflation seen at 9.3 % in first quarter

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By Taonga Sabola:

Monetary authorities expect the country’s headline inflation to hit 9.3 percent the first quarter (Q1) of 2019.

Currently, inflation stands at 9.9 percent, down from 10.1 percent recorded in December 2018.

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In its latest Monetary Policy report, the Reserve Bank of Malawi (RBM) has predicted headline inflation to hit nine percent in the second quarter (Q2).

The new predictions are 0.7 percentage points and 1.0 percentage points lower than what was predicted during the previous MPC meeting.

The downward revision is on account of lower than expected inflation outturn in December 2018, stability of global oil prices which is expected to be passed-through to domestic pump prices, stable exchange rate following improved foreign exchange reserves position and oncoming tobacco selling season.

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RBM says the projected slowdown in food prices during 2019 due to a promising agricultural outlook would also have an impact on the inflation.

“These factors are expected to neutralise the second round effects of electricity tariff and pump fuel price upward adjustments effected during fourth quarter of 2018. In 2019, headline inflation is thus projected to average 8.5 percent,” reads part of the report.

The Economist Intelligence Unit has predicted Malawi’s annual inflation to average 8.9 percent in 2019.

In its 2018 Annual Economic Report, Nico Asset Managers says, as Malawi approaches maize harvest season, food prices are expected to start declining.

“This will ease the food inflationary pressures. The rainfall pattern will continue affecting the agricultural sector performance and inevitably inflation in 2019.

“A good rainfall pattern results in sufficient and increased agricultural production. This will assist in relieving some inflationary pressures,” Nico Asset Managers says.

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