Gov’t targets 21.5% reduction in headline inflation

Gov’t targets 21.5% reduction in headline inflation

Government, through the Central Bank and the use of its monetary tools, seeks to reduce the country’s record headline inflation of 40.4% to 18.9% at end-2023.

The reduction in headline inflation from 40.4% to 18.9% at end-2023 marks a 21.5% decrease on a year-on-year basis.

Making the 2023 budget statement presentation to Parliament on Thursday, November 24, Minister for Finance, Ken Ofori-Atta averred the Central Bank will continue to monitor inflation developments and respond appropriately to contain price pressures.

The end-2023 headline inflation rate target of 18.9%, the Finance Minister noted, is guided by government’s medium-term policy objectives following macroeconomic targets set for the medium-term (2023-2026) that include;

• Overall Real GDP to grow at an average rate of 4.3 percent;
• Non-Oil Real GDP to grow at an average rate of 4.0 percent;
• Inflation to be within the target band of 8±2 percent;
• Primary Balance on Commitment basis to average 0.8 % of GDP in the 2023-2026 period; and
• Gross International Reserves to cover at least 4 months of imports

For the 2023 fiscal year, macroeconomic targets set by government include;

• Overall Real GDP growth of 2.8 percent;
• Non-Oil Real GDP growth of 3.0 percent;
• End-December inflation rate of 18.9 percent
• Primary Balance on Commitment basis of 0.7% of GDP; and
• Gross International Reserves to cover not less than 3.3 months of imports.

latest data indicates that headline inflation accelerated to 40.4 percent in October 2022, from 37. 2 percent in September and 33.9 percent in August.

The rise in the October inflation was broad-based, driven by both food and non food prices.

The Monetary Policy Rate has increased by 1,000 basis points (from 14.5% to 24.5%) since the beginning year as the Central Bank deployed its monetary policy tools to anchor inflation expectations.

Inflation rate increased by 320 basis points (bps) from  37.2% in September to reach an all-year high of 40.4% in  October.

The drivers of inflation appeared unchanged from  the previous month as Housing, Water, Electricity, Gas, and other fuels rose to 69.6% rise in inflation compared to the  68.8% recorded in September, followed by Furnishings,  Household Equipment, and Maintenance (55.7%); Transport  (46.3%); Personal Care, Social Protection and Miscellaneous  Goods and Services (45.5%) and Food and Non-Alcoholic  Beverages (43.7%) which all recorded increases year-on year.

The month-on-month inflation between September 2022 and October 2022 rose by 70bps to reach 2.7%. The  inflation rate remains well above the central bank’s  inflation target band of 8+/-2%.

Food inflation increased to 43.7% which is up from September’s food inflation of 37.8%. Non-food inflation  stood at 37.8%, compared to 36.8% recorded the previous  month.

Overall month-on-month food inflation was 3.2% while non-food inflation stood at 2.3%. Inflation for  imported goods was 43.7% while inflation for local goods  was 39.1%. For the seventh consecutive month running,  inflation for imported items exceeded domestic inflation.

At the regional level, the Eastern Region once again  recorded the highest inflation rate of 51.1% while the Volta Region recorded the lowest inflation rate of 25.8%.