Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says economic gains made during the year are being threatened by rising prices which could slow down growth.
In its Third Quarter (July-September) Economic Review, MCCCI observes that although the Reserve Bank of Malawi (RBM) maintains that risks to inflation have already been accounted for in their analysis, economic agents in the country are concerned that inflation risks still exist.
“The economy’s growth is threatened by rising prices emanating from upward revisions of energy prices and lower agricultural production. Our forecast for 2019 continues to be cautious due to anticipation of continuous intermittent power supply compounded by the challenges and weakened performance of the industrial sector,” reads the report in part.
According to RBM, inflation expectations for the fourth quarter (October to December) have shifted from the June expectation of 10.2 percent to 10.9 percent.
In addition, it is expected that the annual average inflation for 2018 will be at 9.5 percent, which is higher than the earlier expectation of 8.9 percent.
In September, Malawi Energy Regulatory Authority (Mera) increased the price of fuel by an average of five percent, a development which compelled service providers to push up their prices as well.
During the same month, Mera also approved a 31.8 percent tariff hike for Electricity Supply Corporation of Malawi (Escom) over a four-year period.
Maize prices, on the other hand, have also gone up to an average of K7 500 per 50 kilogramme (kg) bag from an average of K5 000 per 50 kg bag some months before.
Maize, Malawi’s staple grain, traditionally impacts the country’s economy given its skewed influence in determining inflation rates, and as part of food, constitutes about 45.2 percent in the consumer price index (CPI), a measure that examines the weighted average price of a basket of consumer goods and services.
Electricity, housing, water and transport, on the other hand, contribute 31.5 percent to the CPI.
Economics Association of Malawi (Ecama) executive director Maleka Thula, in an earlier interview, said the upward revision in domestic fuel pump prices, coupled with the recent hike in electricity tariff, will likely worsen the inflation outturn in the remaining months.
He said what remains key in influencing the magnitude of the upturn in inflation, in the remaining months, is how market players build their expectations regarding this development.