Consumer inflation ended 2022 surging higher for an accelerated 19th consecutive month at 54.1 percent year-on-year (y/y) last December, data from the Ghana Statistical Service (GSS) has shown.
Headline inflation went up 50.3 percent in November 2022 on the back of food inflation, the pass-through effects of higher petroleum prices; and currently sits approximately 5.41 x over the Bank of Ghana’s upper policy target of 10 percent.
This, coupled with the Yuletide-induced demand pressures, further contributed to the uptick in headline inflation.
Commenting on the share of inflation across the various divisions, the Government Statistician, Professor Kobina Annim, indicated that the top drivers of inflation during the period were food and non-alcoholic beverages, leading by 47.5 percent; followed by housing, water electricity, gas and other fuels at 15.7 percent; and transport, 14 percent.
Further to this, the GSS said it noted a wide disparity across the 13 divisions with housing, water electricity, gas and other fuels leading with 82.34 percent. This was followed by furnishings, household equipment and routine household maintenance by 71.52 percent; transport, 71.42 percent; while personal care, social protection and miscellaneous goods and services logged 60.94 percent; with food and non-alcoholic beverages registering 59.71 percent.
The transport sub-group drove the monthly inflation growth at 6.65 percent, followed by furnishings, household equipment and routine household maintenance at 5.04 percent. Personal care, social protection and miscellaneous goods and services logged 4.76 percent; food and non-alcoholic beverages as well as housing, water electricity, gas and other fuels recorded 4.09 percent and 2.9 percent respectively.
Inflation expectations
Irrespective of the cedi’s considerable appreciation and the marked slowdown in ex-pump fuel prices, the market expects inflation to continue surging through January 2023 – albeit at a moderated pace.
Market watchers expect the inflation outlook to peak at the end of Q1 2023.
For instance, GCB Capital in forecasting what to expect said: “We anticipate a sharper cooling of inflation beyond 1Q 2023, as we believe we have seen the worst of cedi depreciation. With government committing to fiscal consolidation under an IMF programme from 2023, we expect the much-needed BoP support and policy credibility from the programme to anchor cedi stability through 2023.
“We believe cedi depreciation and rising petroleum prices are the primary triggers of inflation, and given this improved outlook for 2023 we expect a sharper cooling of inflation beyond 1Q 2023,” it said.
Constant Capital also maintained its outlook of higher inflation in December 2022, with a potential peak deferred to Q1 of 2023.
“In the near-term, we expect to see the impact of pass-through effects from cedi depreciation, elevated petroleum prices, upward transport fare adjustment, lagged impact of utility tariff hikes, as well as the yuletide-induced price increase and consumer demand to continue lifting the CPI,” it said.
BoG’s Efforts
During 2022, the central bank cumulatively increased the benchmark policy rate by 1250 basis points to 27 percent – the highest rate in almost 2 decades. Inflation currently sits at 54.1 percent, thus 5.41 intervals outside the upper limit of the central bank’s medium-term inflation target band – and continues to adversely impact economic activity and consumer behaviour.
The central bank has noted that it may remain hawkish at least through Q1-2023 until inflation shows signs of moderation, and the implementation of other available monetary tools to control money supply and rein-in inflation takes effect.
The tighter monetary policy stance of various central banks around the globe and global recession risks could potentially weigh on Ghana’s economy. The central bank expects inflation to peak in Q1-2023, then decline to a 25 percent range by the end of 2023.
