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Inflation to average 17.6% in 2023 – EIU

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Sosten Gwengwe

The Economic Intelligence Unit (EIU), a research and intelligence department of the Economist Group, says inflation for Malawi is expected to average 17.6 percent in 2023.

The projection highlights a slight drop, as inflation averaged 21 percent in 2022.

This is contained in an annual economic report for 2022 published by financial advisory firm, Bridgepath Capital Limited.

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The report indicates that the expected easing of inflation is on account of projected easing global food and fuel pressures, despite an expected rise in electricity tariffs on the local scene.

It further indicates that the EIU projects that during the period between 2024 and 2026, inflation rate in Malawi will ease further down to a single digit at 8.5 percent.

“Over this period, inflation is anticipated to decline at a faster rate as a result of declining global and domestic price pressures,” the report reads.

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Minister of Finance Sosten Gwengwe recently indicated that the government has placed and is implementing policies that aim at reducing inflation, especially focusing on increasing the country’s production capacity.

He indicated, however, that government will continue exercising caution on monetary policy tightening with the understanding that tight monetary policies can also be harmful to the citizenry.

“Government will maintain or increase the current levels of social benefits and ring-fence social spending budget lines amid rising budget pressures,” Gwengwe said.

Economist from the University of Malawi Lucius Cassim believes there are three main pressure points which need to be checked to achieve such inflation targets.

Cassim said the main thing should be to change the monetary policy framework because the way it is now, Malawi implements policies that do not help in arresting inflation rate such as the recent increases in policy rate.

“Apart from that, we need to manage our exchange rate to avoid imported inflation and we also need to increase our production capacity as a country for exports and local consumption,” Cassim said.

The EIU average inflation rate projection is 4.2 percentage points lower than the government’s projection of an average 21.8 percent for 2023 embedded in the 2022-23 midyear budget.

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