Inflation Closes 2023 at 23.2%

The rate of inflation ended the year dipping to its lowest in more than 20 months after trending above 40.0% in most parts of 2023. Consumer prices had spiraled out of control as the Ghanaian economy suffered a shock from unsustainable debt stock which consequently pushed the government to seek an IMF bailout. The inflation rate started to ease after the monetary and fiscal authorities began to implement measures to stabilize the economy as part of the demands of the IMF-assisted programme.

Consequently, the annual inflation rate closed 2023 at 23.2%, having eased from 54.1% over the same period last year. The government’s end-period inflation target of 31.3% was thus achieved. Month-on-month inflation slowed down marginally from 1.5% in November to 1.2% in December as the rise in economic activities in the festive season had minimal impact on consumer prices.

Food inflation edged down from 32.2% in November to print at 28.7% in December. Prices of food items had remained high in most parts of the year, peaking at a 2023-year high of 61.0% in January before embarking on a steady decline in the later part of the year. December’s food inflation was led by Cocoa drinks at 73.1% and Tea products at 67.8% among seven other sub-group items which recorded inflation rates above the group’s inflation figure. Month-on-month food inflation came in at 1.3% in December, a sharp rise from 0.8% in November.

The inflation rate on non-food items recorded a decline from 21.7% in November to print at 18.7% in December. Alcoholic beverages and Personal care & miscellaneous goods with rates of 38.2% and 31.1% were among five other sub-group items with inflation higher than the group’s annual reading. Month-on-month inflation rate for the non-food category fell the most by 120 basis points from 2.2% in November to 1.0% in December. The fall in the monthly inflation reading was led by Transport which recorded a deflation of 0.1%, down from 0.6% in the previous month.

Across the regions, the inflation rate ranged between 16.0% in the Greater Accra region and 35.9% in the Eastern region. Inflation on imported items fell by a higher margin for the second consecutive time, coming in with a dip from 27.1% in November to 21.9% in December whilst that on locally produced items fell from 26.1% to 23.8% over the same period.

The next sitting of the monetary policy committee due in January is expected to see the announcement of the first policy softening following the significant drop in the inflation rate since the last monetary hike in July 2023. This notwithstanding, the central bank has room for an additional monetary policy stay in the event that it perceives the existence of protracted underlining risks to the inflation outlook.