Inflation begins to reflect impact of Russia-Ukraine war as it hits 19.4% in March

Source: Ghana Statistical Service (GSS)

The ripple effect of the Russia-Ukraine war is beginning to impact the Ghanaian economy, as transport and food drove March consumer inflation to 19.4 percent year on year (y/y), the highest since September 2016 per rebasing of the index, data from the Ghana Statistical Service (GSS) has shown.

Prices rallied by 3.7 percentage points from 15.7 percent y/y in February 2022 and from 13.9 percent y/y in January 2022 − the highest level since the rebasing of the index in Aug-2019.

Consumer inflation, which is the measure of changes in the price of a fixed basket of goods and services purchased by households in the country, has intensified and pushed further away from the reach of the Bank of Ghana (BoG) target band of 10 percent, as food and transport inflation surged.

At the press briefing, Government Statistician, Professor Samuel Kobina Annim said: “If you look at the trends over the last three months, one would want to assume that the effects of the war in Ukraine, if anything, is now telling on inflation, given that the highest inflation was in housing, water, electricity and gas, and it is now telling on transport and food.

“So, it’s clearly pronouncing that the war is having effect on these two items, that is why we are seeing a change away from housing, electricity and gas, to transport having the highest division with inflation rate of 27.6 percent,” Prof. Annim explained.

“Thus, from that perspective one can summarise that we are beginning to see the effects of the Ukrainian war in Ghana,” he said.

Food Inflation

Food inflation continue to dominate in the inflation basket, jumping by 5 percentage points to 22.4 percent in March 2022, from 17.40 percent y/y in February 2022. Following the near convergence reached between food and non-food inflation in December 2021 and January 2022, there is a widening gap with food surpassing non-food inflation in March 2022 to 5.4 percentage points, from 0.4 percentage points in February 2022.

The rate of inflation for Transport at 27.6 percent surpasses both food and non-alcoholic beverages, which was at 22.4 percent in March 2022.

Apakan Securities Limited in its analysis of inflation last month, identified major risks to the inflation outlook in the short-term as emanating from elevated crude oil prices − aggravated by the Russia-Ukraine crises; the sharp depreciation of the local currency; as well as the recent shortage of fertilisers on the global markets will adversely impact food.

“We think elevated crude oil prices − exacerbated by the Russia-Ukraine crises – and its effects on ex-pump petroleum prices and transport fares are yet to be fully reflected in the non-inflation basket.

Furthermore, the sharp depreciation of the local currency, coupled with the reduction of the benchmark values could negatively impact on prices of imported items. Recent shortage of fertilisers and increased costs on the global markets could also adversely impact food yield leading to higher prices on food items. We, thus, perceive major risks to inflation in the short term,” the Apakan report explained.

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