Malawi’s year-on-year headline inflation has averaged 8.65 percent between January and April this year, slightly above the 2021 inflation rate target of 8.4 percent, figures from the Reserve Bank of Malawi (RBM) show.
RBM projected that headline inflation rate would average 8.4 percent in 2021 up from 7.6 percent projected during the second Monetary Policy Committee meeting.
The revision, among others, considered the impact of the lagged effects of the upward adjustments of fuel prices implemented in March 2021 and the anticipated continued depreciation of the kwacha.
Reacting to the trend, economic statistician Alick Nyasulu in an interview on Friday projected that inflationary pressures will be lower this year given the projected higher maize yield.
He said: “Given projected good harvest this year and that maize, which as part of the food component, impacts the country’s economy the projected harvest is enough to offset inflationary effects of the kwacha depreciation, among others.”
Figures show that headline inflation rate is also currently above the upper band of the medium-term target of five percent plus.
A Monetary Policy Report for January to June 2021 said although the outlook points to heightened upside risks to inflation emanating from widening of the fiscal deficit, continued depreciation of the kwacha, high fiscal deficits and rising fuel prices, it is anticipated that inflation will be controlled and remain in single-digit in 2021.
Reads the report in part: “A better agricultural harvest from the 2020/21 crop is expected to be the main source of subdued inflationary pressures and this will be supported by appropriate monetary policy actions.”
Inflation surged in the first quarter of 2021, with headline inflation averaging 8.5 percent from 7.5 percent recorded in the fourth quarter of 2020.
The report indicated that pressures emanated from non-food inflation, which rose to 6.3 percent in the first quarter 2021 from 4.6 percent in the fourth quarter 2020, driven by lagged effects of the upward adjustment in domestic fuel pump prices effected in December 2020.
In contrast, food inflation remained unchanged in the fourth quarter of 2020 at 10.6 percent.