Inflation Woes Deepens

Ghana’s inflation outlook suffered another significant headwind as an upward adjustment in utility tariffs coupled with the freefall of the local currency sent the inflation rate to firm up in a more than 21-year high. The annual inflation figure hardened from 33.9% in August to print at 37.2% in September, the highest since May 2001. The month-on-month inflation figure was reported at 2.0% in September as the rate of increase in the inflation readings continue to slow down after month-on-month inflation peaked at 5.1% in April.

The jump in the recent inflation reading came largely on the back of the implementation of a 27.15% and 21.55% increase in electricity and water tariffs respectively coupled with a nearly 60.0% year-to-date erosion in the value of the local currency. The inflation outlook continues to deteriorate further despite the central bank’s tougher stance against inflation, delivering a 10 percentage points hike in the policy rate in 2022. It is expected that inflation numbers in the last quarter of the year will remain elevated on the back of production cuts by OPEC+, the continuous fall of the local currency, and a strong pick-up in economic activities during the festive season.

After the month-on-month inflation rate dipped to a 2022 year low at 1.8% last month, September’s month-on-month inflation rate climbed up as Tea & other plant products at 13.7% and Water at 12.4% recorded significant monthly increases. Annual food inflation came in at 37.8% in September, up from 34.4% in August with water at 58.9% leading the food category.

Annual non-food inflation continued its record run, climbing further from 33.6% in August to 36.8% in September. The non-food inflation category was led by Housing & utility at 68.8% and Furnishing & household equipment at 51.5%. Month-on-month non-food inflation slowed down to its lowest since February at 1.7% after declining from 2.0% in August.

Across the regions, inflation hovered between 22.9% in the Upper West region and 47.1% in the Eastern region. The gap between inflation on local and imported items widened further in September with inflation on local items coming in at 35.8% and that on imported items at 40.7%.

The last monetary policy committee birthed an additional 250 basis point adjustment in the policy rate to 24.5% with the central bank warning that inflation remains elevated and the balance of risks on the upside.