Consumers may be celebrating the recent dip in inflation, but it is emerging that it is not all that rosy for local businesses, given the trend of cooling prices.
The Association of Ghana Industries (AGI) is calling for a closer look at the numbers because behind the good news lies a troubling irony for local businesses.
A closer look at the recent CPI data, which announced a 9.4% headline inflation for September, shows that imported inflation is now lower than inflation on locally produced goods, meaning it is getting cheaper to buy foreign-made products than those manufactured in Ghana.
Checks by The High Street Journal confirm that both imported and locally produced inflation fell at the same pace. However, imported inflation remains lower at 7.4% compared to 10.1% for local items, showing domestic goods inflation is stickier and now the bigger driver of overall inflation.
On the surface, the overall drop is a relief for consumers battling high prices. But according to the CEO of AGI, Seth Twum Akwaboah, the lower imported inflation could also trigger a dangerous shift in consumer behavior, which can result in more imports and less demand for local goods, and ultimately, fewer jobs.
For Seth Twum Akwaboah, it is positive that inflation is falling, but the specifics matter.
“We need to look at the variables very well. When you have inflation coming down and then the imported inflation is becoming lower than locally produced goods, it has an implication. The implication is that there’s a tendency for people to import more,” the CEO of AGI remarked.
He continued, “So the gains we are supposed to have, we probably will not have them fully because people will buy more of the imported goods. And that doesn’t actually create the jobs that we need because they undermine local production through the loss of market share.”
The development that should make life easier for businesses could end up crippling them instead.
The AGI therefore says that without strong policies to boost local manufacturing and encourage local consumption, the positive effect of falling inflation will be diluted. Tax incentives, infrastructure support, and targeted interventions could tilt the balance back in favor of local producers.
As economists have always drummed home, every carton of imported chicken that replaces locally reared birds, every imported beverage that replaces locally bottled drinks, is a lost opportunity for a Ghanaian worker, farmer, or entrepreneur.
“Generally speaking, it is positive, but let’s look at the specific items and see where the drops are coming from and see how we can tweak this. We can work on the local manufacturing policies that will help local manufacturers, so that as the prices are dropping, people buy more locally produced goods. That’s when you have a maximum positive effect of these developments,” he admonished.
The falling inflation is welcome, but without deliberate support for Ghanaian businesses, AGI fears it risks becoming a silent bane rather than the blessing it appears to be.
