Some economists have observed that it will take much more than just a reduction in inflation standings for consumers to experience a relief in the prices of goods and services.
Figures from National Statistical Office have shown inflation declining in recent months to stand at 10.2 percent in July.
This year’s July inflation is 12.2 percentage points better than the 23.5 percent recorded during the same period last year.
However, according to Alliance Capital Limited, Malawi is experiencing a disinflation where the prices of goods and services do not decline in real terms.
The firm said while disinflation is also a positive development as is the case when an economy is going through deflation, under disinflation conditions, consumers only experiences a slowdown in prices.
“That is why we are not experiencing a general decline in prices, for example, prices are the same or there are some marginal up ticks. It is a confusing phenomenon that even some economists don’t understand, thinking that a disinflation entails a decline in prices.
“Put it another way, if, say a packet of boom detergent was at K400 in January and inflation was, say at 18 percent, it means that it would get to say K420 in July for arguments’ sake. However, if inflation kept declining, it does not mean the price will decline but it means the price of boom would still reach K420 but not as early as July but a little later say in September because the inflation speed is slowing down,” the firm said.
The firm said for prices of goods and services to significantly go down, it will require the economy to grow at a faster pace than it is growing now or output should outpace demand.
Another economist, who did not want to be named because she is not an authority said it is difficult for prices of goods and services to go down now on account of weakness of the exchange rate.
She said the only remedy is for employers to adjust wages to enable their workers mitigate the prevailing cost of living.
“Strong currencies like the dollar will always affect us,” she said.
For a long time, Malawi was listed among countries with highest inflation in the region, including the 26 member Common Market for Eastern and Southern Africa.
Ironically, since the beginning of this year, although inflation has been going down, this has not translated into a decrease in the prices of goods and services.
Government is targeting to achieve single digit inflation before the end of this year.