By Joshua Worlasi AMLANU ([email protected])
Ghana’s headline inflation continued its disinflationary path in May, easing to 23.1 percent from 25 percent in April, according to the Ghana Statistical Service.
The 1.9 percentage point decline aligned with market expectations, though risks remain that could undermine further progress.
The disaggregated data revealed food inflation was the driving force behind the overall easing, dropping to 22.6 percent from 26.8 percent – the lowest rate in 13 months. Conversely, non-food inflation ticked up slightly to 23.6 percent from 23.5 percent in April.
A handful of sub-classes were major contributors to the food inflation rate. Vegetables, tubers, plantains, cooking bananas and pulses accounted for 3.6 percentage points. Ready-made food and other food products (1.9 percentage points), fish and seafood (1.6 percentage points), cereals (0.9 percentage points), and meat (0.8 percentage points) were also notable drivers.
Despite the annual easing, month-on-month inflation surged to 3.2 percent from 1.8 percent – the highest in 10 months. Both food and non-food month-on-month inflation rose for a second straight month, signaling persistent price pressures across sectors.
While the disinflationary trend in May provided some relief, the data underscored lingering inflationary pressures. With upside risks elevated, the central bank signaled its policy stance will remain tight to navigate Ghana’s economy to price stability.
The Bank of Ghana held its benchmark Monetary Policy Rate steady at 29 percent in May. The move aimed to anchor inflation expectations and prevent the recent cedi depreciation from becoming entrenched in prices.
While policy aligns with the IMF programme, the central bank warned that factors like sustained currency weakness and transport fare hikes pose upside risks to inflation.
The latest forecasts project inflation will remain elevated but within the 13-17 percent target range by year-end. However, the bank’s governor cautioned achieving this outlook hinges on maintaining tight policy and liquidity management.
In a statement last week, the Bank of Ghana reiterated its unwavering commitment to policies aimed at delivering price stability in line with its medium-term 8 percent inflation target. Achieving this objective is viewed as a crucial precondition for sustainable economic growth and prosperity.
Regional disparities persist Inflation varied widely across regions. The Upper East recorded the highest rate at 35.6 percent, while Oti had the lowest at 10.3 percent. The Eastern Region saw the peak food inflation rate at 32.1 percent, nearly triple Oti’s level. For non-food inflation, the Upper East topped at 45 percent – almost five times higher than Oti.
Overall, seven divisions recorded year-on-year inflation above the 23.1 percent headline rate. These included alcoholic beverages and tobacco (34.2 percent), restaurants and accommodation (31.6 percent), housing and utilities (26.9 percent), and health (26.5 percent).
Imported vs. Local Inflation
Another key insight was the disparity between inflation for imported versus locally-produced items. Inflation for local goods stood at 24.7 percent – over 5 percentage points higher than the 19.6 percent for imported items. This divergence partly reflects the impact of cedi depreciation on import prices.
