Ghana’s inflation is projected to average 18.8% in 2025, gradually declining from a high of 54.1% in December 2022, according to Fitch Solutions. By the end of 2025, inflation is expected to drop further to around 13.6%. Although this shows improvement, inflationary pressures, especially from rising food prices, remain a challenge.
In January 2025, inflation was recorded at 23.5% year-on-year, which is an increase from the low of 20.3% seen in August 2024. This “stickiness” in inflation is mainly driven by volatile food prices and external economic factors, making it difficult to achieve a single-digit inflation rate in the short term.
Several key factors will determine if Ghana can lower inflation into single digits:
Food Price Instability:
Food and non-alcoholic beverages make up over 42% of household spending. If food prices remain unstable due to supply chain disruptions and climate-related agricultural challenges, it could slow down the decline in inflation.
Monetary Policy:
The Bank of Ghana has tightened its monetary policy to control inflation. However, the challenge lies in balancing interest rates to reduce inflation without negatively affecting economic growth.
Utility and Transport Costs:
Recent increases in water and electricity tariffs, as well as fluctuating transport costs, have added to inflation. However, as these costs stabilize, people’s purchasing power is expected to improve.
Exchange Rate Stability:
A stable cedi is crucial for managing inflation on imported goods. In the past, exchange rate fluctuations have caused significant price increases, particularly in fuel and essential goods.
While inflation is expected to trend downward over 2025, reaching below 10% may be ambitious given current conditions. Achieving this goal will require stable economic growth, improved agricultural productivity to keep food prices in check, and strong coordination between monetary and fiscal policies.
Despite the challenges, there is optimism that inflation will ease in key areas such as housing, utilities, and transportation, which could boost purchasing power and support economic recovery.
For businesses, lower inflation signals a more stable economic environment, making it easier to predict costs and pricing strategies. Consumers may also experience relief as prices for essential goods become more affordable, leading to increased demand for other products.
