Headline inflation rate has seen a further decrease, dropping from 40.1 percent in August to 38.1 percent in September 2023, according to data released by the Ghana Statistical Service (GSS).
The disinflation process began when the rate fell from 43.1 percent in July 2023 to 40.1 percent in August, contrary to market expectations. In the first half of 2023, inflation exhibited signs of easing; starting from a peak of 54.1 percent in December 2022 and reaching 41.2 percent in April 2023. However, in May it increased by 100 basis points; temporarily interrupting the downward trend.
The latest data from GSS attributes September’s decline largely to a decrease in food inflation, a significant contributor to the persistent inflationary pressures. While the drop in headline inflation is a positive development, concerns remain regarding the continuous surge in food prices since May 2023.
Although the disinflation process is ongoing and will expectedly lead to a gradual return to the target range over the medium-term, the Monetary Policy Committee of the Bank of Ghana has raised concerns about the impact of rising international crude oil prices and adjustments to utility tariffs on the inflation outlook.
The decline in headline inflation for September 2023 is likely to provide some relief to consumers grappling with the high cost of living. Nevertheless, economists and policymakers will closely monitor the food market as Ghana enters the crucial harvesting season in the coming months.
Since reaching a peak of 54.1 percent in December 2022, headline inflation has fallen by a cumulative 16 percent. Both non-food and food inflation have decreased significantly, by close to 20.6 percent and 10.3 percent respectively – underscoring the effectiveness of monetary policy. All core inflation measures monitored by the central bank continue to trend downward, indicating ongoing easing of underlying inflationary pressures. Additionally, one-year ahead survey-based inflation expectations appear to be well-anchored.
Earlier this year, the GSS noted a gradual slowdown in the rate of price increases; with inflation decreasing from 52.8 percent in February to 45 percent in March.
In September 2023, food inflation declined from 51.9 percent in August 2023 to 49.4 percent. However, month-on-month food inflation increased from 0.3 percent in the previous month to 1.6 percent in September 2023.
On the non-food front, year-on-year inflation also decreased; with non-food inflation at 29.3 percent in September 2023 compared to 30.9 percent in August 2023. However, month-on-month non-food inflation increased significantly by 2.1 percent in September 2023, reversing the -0.2 percent decrease of the previous month.
A closer look at the inflation figures reveals that locally produced items had an inflation rate of 37.3 percent in September 2023, down from 42.4 percent in August 2023; while the inflation rate for imported items increased to 39.9 percent in September 2023 from 36.2 percent the previous month.
Dr. Ernest Addison, Bank of Ghana (BoG) Governor, emphasised the role of tight monetary policy and relative exchange rate stability in contributing to the ongoing disinflation process, during a media briefing on the Monetary Policy Committee’s stance regarding inflation dynamics.
The BoG Monetary Policy Committee also highlighted its readiness to respond appropriately should inflation deviate from expectations.
The earlier surge in inflation since May 2023, which eased in August 2023 to 40.1 percent, can be attributed to a combination of factors including the impact of new revenue interventions, upward adjustments in utility tariffs, and the continued rise in food prices. Although initial effects of the revenue measures may be waning, the persistent increase in food prices remains a key driver of inflation – partially offsetting the favourable base effect observed since May 2023.
Over the three months ending in July 2023, elevated food costs emerged as a major driver of inflation – presenting challenges for both consumers and policymakers. There is, however, hope on the horizon, as experts anticipate a potential respite in the near-future thanks to the ongoing major staple crop harvesting season.
