Producer inflation in Ghana appears to be gradually stabilizing, with February 2025 recording a year-on-year rate of 27.6% and a month-on-month increase of 1.5%. While this marks a decline from the record highs of mid-2024, it still presents challenges for businesses and policymakers striving for price stability.
The monthly trend shows a slowdown in price increases compared to the 3.6% rise recorded in January 2025, indicating some relief in cost pressures. However, the year-on-year rate suggests that producers continue to grapple with elevated costs compared to the same period in 2024. Between March and August 2024, producer inflation saw a sharp rise, peaking at 33.2% in August before trending downward. The last quarter of 2024 brought some improvements, with inflation dropping to 27.0% in November and 26.1% in December, before picking up again slightly in 2025.
Despite this slowdown, producer inflation remains well above early 2024 levels, highlighting sustained cost pressures on businesses. For the first three months of 2024 beginning February, producer inflation stood at 11.9% in February, 15.9% in March, and 16.5% in April. Compared to February 2025’s 27.6%, this marks a sharp increase of over 132% year-on-year. The significant rise suggests that production costs have intensified despite ongoing efforts to stabilize the economy.
The persistent inflationary pressures in key sectors are likely driven by rising utility costs, raw material expenses, and currency depreciation. While the latest figures suggest some moderation compared to the latter half of 2024, businesses continue to grapple with substantial cost burdens.
Sectoral Breakdown of Producer Inflation
Ghana’s producer inflation is analyzed across three main sectors: Industry, Construction, and Services. Each sector has experienced different levels of inflationary pressure, reflecting varying cost dynamics and economic conditions.
Industry Sector
The Industry sector recorded the highest inflation rates, with 43.7% in January 2025 and a slight decline to 42.9% in February. While cost pressures remain significantly high, there has been a marginal reduction. Industry typically includes manufacturing, mining, and utilities, which are highly sensitive to input costs such as raw materials, energy prices, and currency depreciation.
Construction Sector
The Construction sector has seen a more pronounced decline in inflation, dropping from 29.8% in January to 15.8% in February. This suggests some stabilization in material costs or other production-related expenses. However, the overall level remains significant, pointing to ongoing cost challenges for firms in the sector.
Services Sector
The Services sector maintained a steady inflation rate of 7.7% in both January and February. Unlike the other sectors, services inflation appears to be more stable, potentially due to less dependency on imported raw materials or commodity price volatility. However, businesses in the services industry still face cost burdens that could impact pricing decisions and profitability.
The divergence in inflation across sectors underscores the uneven nature of cost pressures in Ghana’s economy. While the construction sector shows some relief, industry remains under substantial inflationary strain, suggesting that policies aimed at cost reduction should be tailored to sector-specific challenges.
Yearly Producer Inflation Trends
Among key sub-sectors, Mining and Quarrying recorded the highest inflation rate at 44.6%, significantly above the overall producer inflation rate of 27.6%. This surge is largely driven by mining support service activities (73.8%) and mining of metal ores (67.4%), indicating escalating production costs in Ghana’s extractive industry. Such trends could have serious implications for commodity prices and government revenue from the mining sector.
Other sectors also experienced notable inflationary pressures. Accommodation and Food Services recorded 26.5%, signaling rising costs in the hospitality industry, while Transportation and Storage followed closely with 22.7%, likely reflecting increased fuel and operational expenses. Manufacturing posted an inflation rate of 20.8%, with basic metal production (52.0%), motor vehicle manufacturing (35.8%), and leather goods (28.3%) driving the increase.
At the lower end, Electricity and Gas (9.7%), Water Supply and Sewerage (4.9%), and Information and Communication (4.2%) experienced relatively modest inflation rates, reflecting more stable pricing dynamics in these sectors.
Impact of the 2025 Budget on Key Sectors
The recently presented 2025 Budget introduces several measures expected to influence inflationary trends, economic productivity, and sectoral growth. Notable policies include the increase in the Growth and Sustainability Levy (GSL) for mining companies from 1% to 3% of gross production. This measure aims to ensure that Ghana benefits from the recent surge in global gold prices but may also increase tax burdens for companies without favorable fiscal stability agreements.
However, many industry players have expressed dissatisfaction with this move, arguing that it could deter investment in the sector and increase operational costs.
Another key policy is the introduction of the 24-Hour Economy initiative, allowing businesses to operate in three shifts around the clock. This initiative seeks to enhance productivity and create well-paying jobs, particularly benefiting manufacturing operations by optimizing production schedules and increasing output. The policy is also expected to drive demand in the accommodation, food services, and hospitality sectors as businesses operate longer hours. However, increased operational costs could contribute to inflation within these industries.
In transportation, the government plans to reintroduce road tolls using a technology-driven system to fund road maintenance and new infrastructure projects. This measure aims to improve logistics efficiency and reduce vehicle maintenance costs, but higher tolls could contribute to inflation in transportation-related services.
Additionally, a GH¢13.85 billion allocation under the “Big Push” infrastructure program targets investments in roads, schools, hospitals, and other critical infrastructure. This is expected to stimulate growth in the construction sector, leading to job creation and improved infrastructure nationwide. However, increased demand for construction materials and labor could drive up inflation in the sector.
Implications of the Findings
While the 2025 Budget aims to drive economic growth and stabilize key industries, its policies could also contribute to inflationary pressures. Increased costs in the mining sector may lead to higher commodity prices, affecting downstream industries and Ghana’s export revenues.
Manufacturing and construction could see both growth and inflationary strains due to increased production demand and rising input costs. The reintroduction of tolls and the expansion of the 24-Hour Economy could enhance productivity but may also contribute to cost-of-living increases.
Overall, while inflationary pressures appear to be moderating in some sectors, businesses and policymakers must remain vigilant in managing costs and ensuring economic stability.
