A recent report by Databank Research paints a grim picture for Ghana’s inflation outlook, projecting a potential surge to over 20% by the end of the year.
This forecast starkly contrasts with earlier, more optimistic predictions by the Bank of Ghana, which had anticipated a more moderate inflation rate of 13 to 17% by the close of 2024.
Factors contributing to this worrisome projection include escalating fuel prices and a struggling cedi, with the most optimistic scenario still hovering at a concerning 19.5%.
The country’s inflation rate has been on a rollercoaster since the beginning of the year, starting at 23.2% and currently hovering around 22.8%.
Economic experts attribute this inflationary trend to the recent spikes in fuel costs and the depreciation of the local currency.
Databank Research anticipates a further uptick in inflation in their upcoming August 2024 report.
While there are signs of economic recovery, challenges persist, as highlighted by the Bank of Ghana’s Monetary Policy Committee during its 119th meeting.
The Composite Index of Economic Activity showed a modest growth of 2.7% in the first quarter, up from 2.2% the previous year.
However, tight liquidity conditions persist, with broad money growth decelerating to 31% year-over-year.
The recent disbursement of US$360 million by the International Monetary Fund under its Extended Credit Facility has provided some relief regarding Ghana’s debt restructuring efforts.
Nevertheless, the IMF emphasizes the importance of continued fiscal discipline and exchange rate flexibility.
With the upcoming general elections in December 2024, concerns loom over potential inflationary pressures stemming from increased government spending.
Analysts caution that the central bank faces a delicate balancing act, needing to navigate between supporting economic growth and managing inflation expectations in a politically charged environment.
