Research firm IC Research has updated its forecast for Ghana’s inflation in 2024, now predicting it to be between 19.3% and 21.3%. This is a significant increase of 3.4% from their earlier estimates. They expect inflation to rise in the second half of the year, though it might be somewhat reduced by food harvests in the third quarter.
The inflation data from June 2024 showed that food and non-food prices are growing apart, similar to what happened between May and July last year. IC Research noted that this could cause inflation to stay high in the latter half of 2024. This situation is worsened by a favorable comparison to the same period in 2023, which had temporarily lowered inflation pressures.
While it’s too early to say if this trend will lead to long-term inflation problems, the report points out how seasonal factors might affect food prices. For instance, the annual fishing ban that started on July 1, 2024, could keep fish and seafood prices high. This ban lasts one month for small-scale fishing and two months for larger fishing operations, meaning seafood prices might stay high in July but could drop a bit in August.
Non-food inflation is also facing challenges due to new utility tariffs and higher fuel prices that began on July 1, 2024. The recent utility tariff review for July to September 2024 introduced an electricity price increase of 3.45% to 5.84%. Despite this, there’s still a revenue shortfall of GH906.2 million that needs to be addressed in future quarters. IC Research suggests these factors will keep inflation high in the second half of 2024, though the food harvest later in the third quarter might help to lower it.
Current Inflation Trends and Outlook
As of June 2024, Ghana’s inflation rate had decreased for the third month in a row, reaching 22.8% year-on-year, a drop of 0.3%. On a month-to-month basis, overall inflation also fell by 0.3% to 2.9%. Despite this recent downward trend, the revised annual inflation forecast remains much higher than the Bank of Ghana’s year-end target of 13.0% to 17.0%.
IC Research’s forecast highlights the complex mix of factors affecting inflation in Ghana. While the third-quarter food harvest is expected to help, higher utility costs, increased fuel prices, and seasonal effects on food prices pose significant risks to inflation. The research firm stresses the importance of monitoring these factors closely, as they could impact economic stability and policy decisions.
The revised inflation forecast presents challenges for Ghana’s policymakers. The Bank of Ghana might need to adjust interest rates or take other measures to control inflation, especially if it exceeds their target range. Additionally, the government may need to implement policies to reduce the impact of rising utility costs and other non-food inflation on households and businesses.
