The Institute of Economic Affairs (IEA) has forecasted an inflation rate of 15-17% in 2025, significantly exceeding the International Monetary Fund’s (IMF) projection of 8% and the Bank of Ghana’s target of 8% ± 2%.
In its latest bi-monthly economic outlook, the IEA emphasized the need for stronger policy interventions to address inflation, which ended 2024 at 23.8%, up slightly from 23.0% in November. This figure also surpassed the IMF-supported programme’s projection of 18.0% for the year.
Inflation throughout 2024 hovered in the low twenties, far above the central bank’s target range. Under the IMF programme, inflation is expected to fall to 8.0% in 2025, aligning with the Bank of Ghana’s mid-point target. However, the IEA described this forecast as overly optimistic, citing historical trends. Instead, it predicts inflation in the range of 15-17%, with a gradual decline to 8.0% during the 2026-2029 period, contingent on robust policy measures.
Food inflation was a key driver of rising costs in 2024, ending the year at 27.0%, compared to non-food inflation at 20.3%. Food prices, which comprise 43% of the Consumer Price Index (CPI) basket, have consistently outpaced non-food inflation, highlighting their critical role in overall inflation and the cost of living.
The IEA stressed that addressing food prices, energy costs, and exchange rate volatility is vital to achieving meaningful inflation reductions. It noted, “Even if the projected 8.0% inflation for 2025-2029 is realized, Ghana’s inflation will still remain higher than its major trading partners, affecting competitiveness.”
To counter this, the IEA urged the government and the Bank of Ghana to collaborate on targeted interventions in key areas, concluding that, “Inflation must be reduced further through stronger measures to ensure economic stability and competitiveness.”
