The Ministry of Finance has said it expects inflation—the rate at which commodity prices change at a given time in an economy—to marginally decline to 27.1 percent in 2024.
This represents a 1.7 percentage point decline when compared to the 28.8 percent average inflation recorded in 2023.
The projection is contained in the 2024-25 national budget statement which Minister of Finance Simplex Chithyola Banda presented to Parliament on Friday.
This also means prices of commodities may remain high for the better part of the year.
Chithyola said inflation continues to negatively affect the disposable incomes of Malawians, as evidenced by the continued increase in prices of commodities.
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“The high inflation is mainly attributed to an increase in food prices,” Chithyola Banda said.
Figures he presented show that as of December 2023, food inflation was at 43.5 percent compared to 31.3 percent for the same month in 2022.
Similarly, non-food inflation rose to 22.8 percent in December 2023 from 18.6 percent in December 2022. Annual average inflation is expected to improve in 2024 and 2025 to 27.1 percent and 12.4 percent, respectively.
However, the Malawi Economic Monitor, a bi-annual publication by the World Bank notes that inflationary pressures will persist in the short term but are expected to ease toward the end of 2024.
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“This projection is based on both the expected reduction of short-term effects from the exchange rate adjustment and the implementation of supportive macroeconomic and structural policy reforms.
“Nevertheless, the ongoing El Nino season may lead to lower-than-expected agricultural production and sustained elevated food prices. Looking ahead, the implementation of prudent monetary and fiscal policies is essential to mitigate the impacts of these factors and lower inflation sustainably,” the MEM reads.
In a recent interview, RBM Director of Economic Policy and Research Kisu Simwaka said they expect inflation to start falling in the second half of the year.
Commenting on the development, economist Marvin Banda said efforts to bring inflation down may be hampered by how the 2024-25 national budget has been drafted.
“This budget will be highly inflationary and will exert considerable pressure on monetary policy and other tools the RBM has at its disposal.
“With government spending seen above 28 percent of GDP and increasing, it begs the question about the fiscal prudence the minister has been touting. However, if the ATM strategy is followed the nation may be seen to hedge against potential risk the population faces in the near future,” Banda said.
