Inflation peaking in Q1 2023 not definite – Prof Osei-Assibey says
The Ghanaian economy over a year now, has been grappling with high inflation with the latest data showing inflation rate at 53.1% in January 2023.
While some analysts have predicted that inflation may peak in the first quarter of 2023, Associate Professor at the University of Ghana, Professor Eric Osei-Assibey, has warned against such a definitive assertion.
Speaking at the 2023 Ghana Economic Outlook Forum organized by the American Chamber of Commerce in Ghana, Professor Osei-Assibey acknowledged that there had been a marginal decline in inflation in January, which could suggest that inflation has peaked to a certain extent.
However, he pointed out that new taxes and increased utility tariffs, which are yet to be implemented, have the potential to further increase inflation. As such, it would be difficult to determine whether inflation has indeed peaked or not.
Prof Osei-Assibey’s assertion is on the back of statements made by the BoG that, inflation is expected to peak in the first quarter of 2023, before gradually easing thereafter.
This is despite projections by the Bank that headline inflation will remain above the upper band of 8±2 percent until the second half of 2025, indicating that inflationary pressures are expected to persist for some time.
According to the Central Bank, underlying inflationary pressures remain broadened and could be reinforced by additional shocks in the near-term with the announcement of new revenue measures in the 2023 Budget, additional exchange rate pressures, and upward adjustments in utilities and ex-pump prices.
Looking ahead, the key drivers of inflation will be currency depreciation, crude oil prices, input supply challenges, taxes, and weather-related food distributional challenges
Inflation has been a worrying trend for the central bank, which has been grappling with the challenge of balancing the need to support economic growth with the need to keep inflation under control. The bank’s decision to keep the policy rate high in its January 2023 Monetary Policy Report was driven by the significant upside risks to the inflation outlook, highlighting the challenges faced by policymakers in balancing these competing demands.
Monthly inflation started to decline from 8.6% in November to 3.8% in December 2022, reflecting a slowdown in the rate of increase in inflation. Month-on-month food inflation also decelerated from 10.4% to 4.1%, while non-food monthly inflation also slowed from 7.2% to 3.6% over the same comparative period. These figures suggest that the Bank of Ghana’s efforts to rein in inflation are beginning to bear fruit.
Nevertheless, the challenges facing the Ghanaian economy are likely to persist for some time. The ongoing Covid-19 pandemic and Russia-Ukraine war continues to pose a significant threat to the global economy, and Ghana is no exception. With the Bank of Ghana projecting that inflation will remain above the upper band of 8±2 percent until the second half of 2025, it is clear that policymakers will need to remain vigilant in their efforts to support economic growth while keeping inflation under control.
