IMF forecasts 45% average inflation rate for Ghana
Ghana’s economy has been under pressure due to high inflation rates, which have been attributed to the rising prices of foodstuffs and other commodities such as crude oil on the global market. According to the latest World Economic Outlook Report by the International Monetary Fund (IMF), Ghana’s inflation rate is expected to remain high in 2023, with an average forecast of 45.4%.
This projection is a significant concern for policymakers and investors alike, as it indicates that the country’s economy is likely to experience continued volatility and uncertainty in the coming months. However, the IMF report also predicts that inflation in Ghana will end the year at 29.4%, and in 2024, the inflation rate is forecasted to average 22.2% and end the year at 15.0%.
The high inflation rates in Ghana are not unique to the country and are reflective of the broader global trend of rising prices. The IMF report states that global headline inflation has been declining since mid-2022 at a three-month seasonally adjusted annualized rate, owing to a fall in fuel and energy commodity prices, particularly for the United States, euro area, and Latin America.
Central banks around the world have been raising interest rates since 2021 to dampen demand and reduce underlying core inflation. However, in Ghana, this has proven to be a difficult task, as the country’s high inflation rates have been driven primarily by food prices, which are highly sensitive to supply and demand shocks.
The IMF report also highlights that inflation excluding volatile food and energy prices has been declining at a three-month rate in most (though not all) major economies since mid-2022, albeit at a slower pace than headline inflation. Nonetheless, both headline and core inflation rates remain at about double their pre-2021 levels, indicating that inflation pressures remain elevated globally.
In 2022, Ghana’s inflation rate stayed above 50%, which was a cause for concern for policymakers and investors. The country has been implementing various measures to address this issue, such as increasing interest rates, implementing price controls on some basic goods, and promoting local production of foodstuffs to reduce reliance on imports.
Despite these efforts, the IMF report suggests that Ghana’s inflation rate is likely to remain elevated in the near term, which will continue to pose a challenge for the country’s economic growth and stability. The government will need to implement further measures to address this issue, such as promoting investment in agriculture, improving infrastructure and logistics to reduce food waste, and implementing policies that promote price stability and anchor inflation expectations.
Ghana’s high inflation rates are a cause for concern for the country’s policymakers and investors. While global headline inflation has been declining, Ghana’s high inflation rates are driven primarily by food prices, which are highly sensitive to supply and demand shocks. The government will need to implement further measures to address this issue and promote economic stability in the coming months.
