International research and market information firm, Fitch Solutions, has revised its average inflation forecast for Ghana in 2023 to 37.6% from 33.4%.
According to its latest assessment of the Ghanaian economy, it attributed its forecast to the high-interest rates environment in the country.
“While we expect inflation to remain on a disinflation path over the coming months on the back of moderating global energy prices (Brent crude has fallen to US$75.0 per barrel in March, a 15-month low) and a more stable exchange rate, it will remain well-above target”.
“We forecast inflation to average 37.6% in 2023, higher than the 31.5% recorded in 2022. As such, we believe that policymakers will remain focused on controlling price growth in the near term as they aim for a more substantial disinflation trajectory before concluding the tightening cycle”, it explained.
It further stated that inflation will remain painfully high in the coming months.
Interest rate risks skewed to upside
Continuing, Fitch Solutions said the risks to its interest rate forecasts are skewed to the upside.
“If price pressures surprise to the upside – due to global supply chain disruptions or renewed currency weakness – the BoG [Bank of Ghana] would likely have to hike its policy rate further to anchor inflation expectations”.
It warned that if Ghana fails to obtain critical International Monetary Fund funding by the end of quarter 2, 2023, the cedi would sell off again due to weak investor sentiment and falling foreign exchange reserves.
“In this scenario, inflation would increase, which indicates that the BoG would tighten monetary policy beyond our current forecasts”, it added.
February 2023 inflation slows to 52.8% to sustain downward trend
Year-on-year Inflation for the month of February 2023 slowed down to 52.8%, the Ghana Statistical Service has pointed out.
This was a reduction from the January 2023 estimate of 53.6%, influenced by the fall in inflation of transportation and other non-food items.
It was the second consecutive time that the rate dropped in 20 months. In January 2023, inflation fell marginally to 53.6%, from 54.1% recorded in December 2022.
Source: Business Analyst