By Chimwemwe Mangazi
The Monetary Policy Committee (MPC) of the Reserve Bank of Malawi (RBM) has reduced the inflation outlook for 2024 by 100 basis points to average 32.5 percent.
This is contained in a statement of the MPC’s fourth meeting of 2024 published by the central bank last week.
According to the MPC, food prices were a major factor in the increase in overall inflation, which rose to 33.9 percent in the third quarter of 2024, up from 32.8 percent in the previous quarter.
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Food inflation increased to 42.5 percent while non-food inflation remained relatively stable at 22.3 percent.
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“Looking ahead, inflation is expected to average 32.5 percent in 2024.
“Headline inflation is expected to decline significantly in 2025, largely on account of a supportive monetary policy stance, anticipated better climatic conditions and favourable base effects,” the statement reads.
But the MPC says growth in the money supply poses a key risk to this outlook.
This is coming against the background that the MPC increased the 2024 annual inflation projection from 30 percent in the second MPC meeting to 33.5 percent primarily due to elevated food prices.
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In a recent interview, RBM spokesperson Mark Lungu stressed that while projections may change due to various economic developments, the central bank remains focussed on its medium to long-term objective to achieve rates between five and seven percent.
Lungu acknowledged that recent projections, influenced by factors such as food supply shortages and climate-related issues, have pushed inflation estimates higher but that such short-term fluctuations would not alter the bank’s strategic aims.
“We may delay getting there, but that’s what we think will be good for the economy. Projections may change depending on what we see. For example, we think by December we will be around 30 percent or thereabout because of the situation on the ground,” Lungu said.
He added that RBM would maintain a tight monetary policy stance to leverage gains made in stabilising non -food inflation.
Consumer prices projections released by the International Monetary Fund (IMF) recently show that Malawi’s inflation has risen enough and is expected to start falling to reach 6.5 percent in 2029.
The IMF forecasts Malawi’s inflation rate to average 30.6 percent in 2024, marking the highest point in recent years, before beginning a gradual descent.
However, currently average inflation for the first nine months of the year stands at 33.38 percent.
The IMF projections further show a consistent upward trend in Malawi’s annual average inflation, rising from 9.3 percent in 2021 to 20.8 percent in 2022, and further to 28.8 percent in 2023.
The IMF offers some hope for the medium term, projecting Malawi’s inflation to halve to 15.3 percent by 2025.
