Inflation rose further by 0.2 percentage points to an average of 23.7 percent in the third quarter. This was largely due to the rise in food inflation to 30.8 percent from 29.0 percent in the previous quarter owing to supply constraints, notably for meat and poultry products. On the other hand, non-food inflation declined to 15.6 percent from 17.2 percent, mainly as a result of the appreciation of the Kwacha against the US dollar.
The impact of the appreciation of the Kwacha continued to exert downward pressure on prices leading to inflation declining to 21.1 percent in October from 22.1 percent in September.
Inflation is projected to decelerate sharply over the next eight quarters on account of the dissipation of base effects, lagged impact of the appreciation of the Kwacha, and anticipated stronger fiscal consolidation. Nonetheless, it will remain above the upper bound of the 6-8 percent target range. In 2021, inflation is projected to average 22.6 percent, decline to 15.0 percent in 2022, and to 9.3 percent during the first three quarters of 2023.
The upside risks to the inflation outlook include the possible increase in fuel pump prices and electricity tariffs necessary to restore fiscal sustainability, as well as the predicted fourth wave of COVID-19, which could disrupt supply chains and trigger price increases. The expected further decline in maize prices.