November 2021 Market Intelligence Report

ECONOMIC POLICY RESEARCH DEPARTMENT

MARKET INTELLIGENCE REPORT FOR NOVEMBER 2021

1. OVERVIEW

• Global economies continued to show diverse performance in key macroeconomic variables in November 2021. Specifically, inflation pressures mounted in all the selected advanced and emerging market economies while performance was mixed in the Sub-Saharan African (SSA) economies. Meanwhile, currencies of some countries, in both advanced and emerging market economies, as well as the SSA region, depreciated during the month under review, while others experienced appreciations.
• During the same period, some countries adjusted their local fuel pump prices while others did not.

transport, as well as housing and household services.

• The USA economy also saw its inflation rate rising to 6.8 percent in November 2021 from the preceding month's position of 6.2 percent. At the November level, the USA's inflation was the highest since June 1982. The acceleration was mainly driven by the energy index which increased by 33.3 percent. This was complemented by a 11 percent rise in prices of new vehicles and a 6.1 percent increase in food prices. These changes are the largest year-on-year increases in at least 13 years.

Chart 1: Inflation Rates in Selected Advanced

and Emerging Market Economies2

• Similar to global trend, inflation pressures heightened on the domestic front and the kwacha recorded a marginal depreciation against the US dollar. However, domestic fuel pump prices were maintained at the October 2021 level.

2. DEVELOPMENTS	IN	SELECTED
ADVANCED AND	EMERGING	MARKET
ECONOMIES 1

• 2.1. Inflation Developments

• All the selected advanced and emerging market economies (that is, the United Kingdom (UK), United States of America (USA), Eurozone, India and China) experienced high inflation in November 2021 relative to the previous month (See Chart 1).
• In the UK, for example, inflation rate increased to
  5.1 percent in November from 4.2 percent in October 2021, the highest since September 2011. The upturn was mainly a result of rising energy prices reflecting basal effects and supply chain disruptions, which led to increased costs of

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1.0									2.0
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-1.0	Jan-19	Apr-19Jul-19Oct-19Jan-20Apr-20	Jul-20	Oct-20	Jan-21	Apr-21	Jul-21	Oct-21	0.0
Oct18-
		USA			UK
		EURO AREA			CHINA
		INDIA(RHS)

• Similarly, inflation edged up by 0.8 percent in China to 2.3 percent in November 2021, the largest since August 2020. The upturn followed a seasonal increase in aggregate demand amid supply constraints due to the sporadic COVID-19 outbreaks. The notable sources of pressures were

1These countries were selected due to their significant contribution in the composition of Malawi's merchandise trade

2This chart has been derived using data sourced from websites of central banks and statistical bureaus for the selected countries

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food prices, which went up for the first time in six months, as well as the continued soaring energy prices.

• The Indian economy recorded a marginally higher inflation rate of 4.9 percent in November 2021 than the preceding month's position of 4.5 percent. The increase was attributed to rising costs of mineral oils, basic metals, crude petroleum and natural gas, chemicals and chemical products, and food products.
• In the Euro area, inflation rate rose to 4.9 percent in the review month, from 4.1 percent recorded in October 2021. Like in the other economies under this group, the main cause of elevated inflation pressures were high energy prices. This was exacerbated by rising costs of items under the services; non-energy industrial goods and; food, alcohol and tobacco categories.

2.2. Exchange Rate Developments

• Meanwhile, mixed performance in the exchange rates, both month-on-month(M-o-M) and annualised, for the selected advanced and emerging market economies, was observed during the month under review (see Chart 2).3

Chart 2: M-o-M Exchange Rates Changes in

Selected Advanced and Emerging Market

economies4

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1.50

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UK EURO CHINA USA INDIA

-0.50

-1.00

3Unlike all countries whose exchange rates have been expressed in terms of the US dollar, the US exchange rate was expressed in terms of the IMF Special Drawing Right.

• On M-o-M basis, the British pound (GBP) and the euro registered depreciations of 1.8 percent and 1.7 percent against the US dollar, respectively. On the other hand, the Chinese yuan and the Indian rupee (INR) recorded appreciations of 0.6 percent and 0.4 percent against the US dollar. During the same period, the US dollar appreciated by 0.3 percent against the International Monetary Fund's (IMF) Special Drawing Rights (SDR).
• Annually, the euro weakened by 4.9 percent and the Indian rupee recorded a marginal depreciation of 0.3 percent against the US dollar. In contrast, the Chinese yuan and the British pound appreciated by 3.2 percent and 0.8 percent against the US dollar, respectively. Meanwhile, the US dollar (US$) recorded an annual appreciation rate of 1.8 percent against the IMF SDR during the period under review.

2.3. Fuel price developments

• Global Brent crude oil prices slightly declined in November 2021, from US$83.5 per barrel to
  US$81.4 per barrel. However, there were variations in the response of retail pump prices in the selected economies.
• For example, in the UK, petrol pump price increased to GBP1.47 per litre (or US$1.94 per litre) in November 2021 from GBP1.41pound per litre (or US$1.87 per litre) in the previous month. Similarly, diesel prices rose from GBP1.45 per litre (or US$1.92 per litre) in October 2021 to GBP1.51 per litre (US$2.00 per litre) in the month under review.
• The USA economy had its November 2021 pump prices also raised to US$0.77 per litre for petrol from US$0.74 per litre in October 2021. The price of diesel was at US$0.81 per litre from US$0.79 per litre in October 2021.
• In contrast, petrol pump price in India slightly declined in November 2021 to INR104.01 per litre (or US$1.37 per litre) from INR109.71 per litre (or US$1.46 per litre) in the previous month. Diesel prices also declined from INR98.08 per litre (or US$1.31 per litre) in October 2021 to INR86.71 per litre (or US$1.16 per litre) in November 2021.

4This chart has been derived using data sourced from websites of central banks and statistical bureaus for the selected countries

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3. DEVELOPMENTS IN SELECTED SUB- SAHARAN AFRICAN ECONOMIES

3.1. Inflation Developments

• The November 2021 inflation performance in the SSA region was diverse. For example, inflation picked up in South Africa, Mozambique, Namibia, Uganda, Tanzania and Angola but eased in Zambia, Kenya, Botswana, Nigeria and Rwanda compared to their respective October 2021 positions (See Chart 3).

Chart 3: Inflation Rates in Selected SSA

Countries5

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	Sep-18	Dec-18	Mar-19Jun-19Sep-19Dec-19Mar-20	Jun-20	Sep-20Dec-20Mar-21Jun-21	Sep-21
-5.0	0.0
			Botswana		Mozambique
			South Africa		Kenya
			Rwanda		Tanzania
			Angola(RHS)		Nigeria(RHS)
			Zambia(RHS)		Malawi (RHS)

• The South Africa economy recorded a larger inflation rate of 5.5 percent in November 2021 than the preceding month's position of 5.0 percent, exceeding the market's expectation of 5.4 percent and the 4.5 percent midpoint of the South African Reserve Bank's monetary policy target. The acceleration was underpinned by increases in prices of transport; food and non-alcoholic beverages; housing and utilities and miscellaneous goods and services.
• Likewise, inflation rate in Mozambique increased to 6.8 percent in November from 6.4 percent in October 2021, reaching the highest rate since October 2017. The upward pressures emanated from

5 This chart has been derived using data sourced from websites of central banks and national statistic bureaus for the selected countries

food and non-alcoholic beverages; and housing, water, electricity, gas and other fuels.

• Similarly, Uganda's inflation rate stood at 2.6 percent in November 2021, up from 1.9 percent in the preceding month. The rise was attributed to increases in costs of food and non-alcoholic beverages; furnishings; health; transport and restaurants and hotels.
• Tanzania's inflation rate slightly increased to 4.1 percent in November 2021 from 4.0 percent in October. The uptick resulted from high prices of food and non-alcoholic beverages; transport; housing and utilities; clothing and footwear; and restaurants and hotels.
• The Angolan economy also experienced a marginal rise in its inflation rate to 27.0 percent in November 2021, from 26.9 percent in the previous month, the highest since July 2017. Food inflation remained the main driver at 30 percent, still reflecting the impact of the sharp devaluation of the kwanza in 2020 amid the country's strong dependence on imported goods.
• In Namibia, inflation rate rose to 4.1 percent in November 2021 from 3.6 percent in the previous month. The main sources of pressures were transport; food and non-alcoholic beverages; housing, water, electricity, gas and other fuels; furnishings, household equipment and routine maintenance of the house; and miscellaneous goods and services.
• In contrast, inflation rate for Zambia decreased to 19.3 percent in November 2021, from 21.1 percent in the previous month. The decline was on the back of a stronger kwacha that helped to bring down the costs of imports such as household appliances, vehicles, and certain food items like meat and fish.
• In Botswana, inflation rate also declined to 8.6 percent in November from 8.8 percent in October 2021. The development was mainly due to easing pressures in prices for food and non-alcoholic beverages; furniture; and transport items.
• The Kenyan economy experienced a lower inflation rate of 5.8 percent in November, than 6.5 percent for October 2021. The slowdown was mainly on account of a decline in prices of food and non- alcoholic beverages; transport; health; education

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services; and restaurants and accommodation services.

• Inflation rate for Nigeria also declined for the eighth straight month to 15.4 percent in November 2021 from 16.0 percent in the previous month. The deceleration was largely due to the continued ease in food inflation to 17.2 percent during the month, from 18.3 percent in October 2021.
• The Rwandan economy recorded a deflation of 3.4 percent in November 2021, following another deflation of 3.3 percent in the previous month. This marked the fifth consecutive month of deflation and the steepest fall in consumer prices since October 2018. The deflation was mainly on account of a decrease in prices of items under food and non- alcoholic beverages by 12.3 percent in the month, compared to a decrease of 10.6 percent in October 2021.

3.2. Exchange Rate Developments

• Regarding exchange rates, currencies of some of the selected SSA member countries strengthened against the US dollar in November 2021 while others experienced depreciations (See Chart 4).
• The South African rand recorded the sharpest M-o- M depreciation of 5.6 percent, followed by the Botswana pula (BWP) at 2.9 percent; then the Zambian kwacha at 1.8 percent; the Kenyan shilling at 1.5 percent; the Rwandan franc (FRw) at 1.0 percent; and the Nigerian naira at 0.2 percent. The Mozambican metcal was relatively stable in November 2021. In contrast, the Ugandan shilling, Angolan kwanza, and Tanzanian shilling strengthened by 1.2 percent, 0.8 percent and 0.2 percent during the review month, respectively.
• Annually, depreciations were noted in the Nigeria naira (8.6 percent), the Rwandan franc (4.9 percent), the Botswana pula (4.6 percent), the South African rand (3.7 percent), and the Kenyan shilling (3.0 percent). However, the Zambian kwacha (ZK) gained 16.3 percent followed by the Mozambican metcal at 12.2 percent then the Angolan kwanza at 8.5 percent, the Uganda shilling at 3.9 percent and the Tanzanian shilling at 0.3 percent (See Chart 5).

3.3. Fuel Price Developments

• Like the developments in the advanced economies, SSA countries also experienced mixed performance in retail fuel prices during the month under review.

• In South Africa, retail petrol pump price was slightly adjusted upwards to R19.32 per litre (or US$1.20 per litre) in November 2021 from R18.11 per litre (or US$1.18 per litre) in the previous month. Meanwhile, diesel pump price rose to R17.23 per litre (or US$1.07 per litre) in November 2021 from R15.75 per litre (or US$1.03 per litre) in October.
• The Botswana Energy Regulatory Authority maintained the retail pump prices of petrol at the October price of BWP0.71 per litre (or US$0.06 per litre); and diesel at BWP0.55 per litre (or US$0.05 per litre) in November 2021.
• Similarly, the November 2021 retail pump prices in Tanzania were maintained at Ts2497.00 per litre (or US$1.09 per litre) for petrol and Ts2302.00 per litre (or US$1.00 per litre) for diesel, as in October 2021.
• In Zambia, the Energy Regulatory Board also maintained the retail pump prices for both petrol and diesel in November 2021 at ZK17.62 per litre (or US$1.02 per litre) and ZK16.92 per litre (or US$1.00 per litre), respectively.
• Likewise, the Rwanda Utilities Regulatory Authority retained the retail pump prices for petrol at FRw1143 per litre (or US$1.22 per litre) and for diesel at FRw1054 per litre (or US$1.05 per litre), as in October 2021.
• In contrast, the Energy and Petroleum Regulatory Authority of Kenya revised downwards the retail pump price of petrol from Ks134.72 per litre (or US$1.22 per litre) to Ks129.72 per litre (or US$1.16 per litre) in November 2021. However, the pump price for diesel was maintained at Ks110.60 per litre (US$0.99/litre) in November 2021, as in October 2021.

4. DOMESTIC DEVELOPMENTS

4.1. Inflation Developments

• On the domestic front, headline inflation rate accelerated to 11.1 percent in November from 9.8 percent in October 2021. The outturn was on account of both food and non-food inflation. Food inflation rate rose by 1.0 percentage points to 12.8 percent in November 2021 from 11.8 percent in the preceding month. Similarly, non-food inflation rate increased to 9.5 percent in November 2021 from 7.8 percent in the preceding month.

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• On a monthly basis, inflation increased by 3.3 percent in November 2021, same rate as in the preceding month. Food prices rose by 4.6 percent which is lower than 5.6 percent for October 2021. However, non-food prices edged up by 2.0 percent compared to 1.1 percent recorded in October 2021.
• As shown in chart 3, the November 2021 inflation rate for Malawi was lower than inflation rates for Angola, Nigeria and Zambia, but higher than those of Mozambique, Botswana, Kenya, Tanzania, Rwanda, and South Africa.

4.2. Exchange Rate Developments

• In November 2021, the Malawi kwacha depicted mixed performance against currencies of its major trading partners.
• The kwacha weakened by 5.9 percent against the euro and 0.2 percent against the US dollar, to close the month at K1099.91 per euro and K822.88 per US dollar, respectively.
• However, the kwacha appreciated by 0.6 percent against the British pound and traded at K1194.23 per pound. Similarly, the kwacha strengthened by 3.1 percent against the South African rand and closed November 2021 at K57.21 per rand.

Chart 4: Monthly changes in Local Currency per

US Dollar in October 20216

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• On a year-on-year basis, the kwacha weakened by 7.4 percent against the US dollar in November 2021 (See Chart 5).

Chart 5: Year-on-year changes in Local Currency per US Dollar in October 2021

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	Nigeria Malawi Rwanda Botwana SouthAfrica Kenya Tanzania Uganda Angola Mozambique Zambia
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-15.00
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4.3. Fuel Price Developments

Malawi's pump prices for both petrol and diesel were maintained at the October positions of K1150.00 per litre (US$1.40 per litre) and K1120.00 per litre (US$1.36 per litre), respectively.

5. CONCLUSION

During the month of November 2021, global economies continued to show mixed performance in some selected macroeconomic indicators. In all the country groupings, some countries had their currencies depreciating against the US dollar while others experienced appreciations. Meanwhile, rising inflation pressures continue to be a common challenge across countries, and the drivers are mainly a rebound in prices of energy, food, and utilities. However, the possibility of the reintroduction of COVID-19 pandemic restrictions following the outbreak of the Omicron variant could derail monetary policy's anti- inflation efforts due to concerns about economic recovery. On the domestic front, authorities continue to monitor the developments and take necessary action to ensure that inflation is well managed.

6 This chart has been derived using data sourced from websites of central banks for the selected countries

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