The general price levels of goods and services in November 2020 increased by 9.8 percent but represents the lowest inflation rate since the pandemic started impacting prices, data released by the Ghana Statistical Service (GSS) have shown.
Prior to April this year, inflation had stayed flat at 7.8 percent for three consecutive months beginning January. However, impulse and panic-buying ahead of the lockdown announcement precipitated prices of goods and services to shoot up astronomically, thereby pushing inflation to hit a double-digit figure of 10.6 percent in April 2020.
Following this development, prices continued to spike – largely catapulted by increase in food prices and other essential supplies needed to fight or contain spread of the pandemic. However, the GSS data show that food inflation has declined to 11.7 percent compared with 12.6 percent the previous month. Non-food inflation, on the other hand, remained constant at the 8.3 percent recorded in October. Inflation for locally produced items was 11.5 percent, while that of imported items was 5.6 percent for November.
The decline in inflation ahead of the next Monetary Policy Committee (MPC) meeting in January 2021 may trigger a decision to reduce the rate should the disinflation process continue, as the committee signalled at an engagement with the press last month, November.
But one that thing remains a threat to the probability of such an outcome is the declining fiscal situation, which government attributes to the pandemic’s impact. In fact, the MPC acknowledges it may delay any probable reduction in the rate should the deficit figures continue in this trajectory.
“Fiscal policy has been a source of considerable stimulus, driven by exceptional expenditures directed toward goods and services, capital expenditures, COVID-related spending, and in the energy sector. As at July 2020, the budget deficit was higher than programmed. Indications from banking data point to a faster budgetary execution in August relative to the annual target of 11.4 percent of GDP, supported by exceptional domestic and foreign financing sources.
“The drivers of economic growth are returning to normal with prospects for a good recovery. Monetary and fiscal policies have been supportive, providing the necessary underpinnings for the economy to withstand negative output shocks arising from the pandemic. However, this has come at the cost of moving away from a consolidation path and could pose a risk to long-term macroeconomic stability if decisive measures are not taken to define a feasible fiscal adjustment to stabilise debt,” the Committee said in its last report.