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Price hikes push up inflation to 9.5%

 

Increases in price of food and non-food items has pushed up September 2018 inflation rate by 0.2 percentage points to 9.5 percent, figures from the National Statistical Office (NSO) show.

During the review period, food and non-food inflation rate rose by 0.1 percentage points and 0.2 percentage points to 10.2 percent and 8.9 percent, respectively.

Rising electricity tariffs is expected to put pressure on inflation

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, which 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: “Non-food inflation is likely to be higher than earlier projected since this increase in domestic fuel pump prices was not expected after the prices were already adjusted upwards by an average of 9.3 percent in July 2018.

“However, this development is not expected to largely distort the inflation trajectory projected by authorities as the expected upturn in inflation is deemed to be temporary. Thus, inflation can still be projected to average of between nine and 10 percent for 2018.”

Thula 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.

Last month, the Monetary Policy Committee (MPC) of the Reserve Bank of Malawi (RBM) maintained the inflation forecast of a single digit this year and five percent in the first quarter (January to March) of 2020.

RBM Governor Dalitso Kabambe earlier said the rise in inflation rate was already projected, saying the central bank had already put in place controls to manage the situation.

He said the movement in global oil prices and risks in terms of water and electricity tariffs adjustments were factored into the projections.

Nico Asset Managers Limited recently noted that Malawi faces a rollercoaster ride of rising inflation rate as the country is in the lean season in terms of food availability.

Inflation rate has been on the upward movement from July this year due to rising food prices.

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