The African Development Bank (AfDB) has projected an average inflation rate of 15 percent for Ghana in 2022 in its 2022 African Economic Outlook .
The Bank assessed Ghana’s economic outlook as positive but warned that potential inflationary pressure exists due to increased energy and food prices associated with the impact of the Russia– Ukraine war.
To counter these potential inflationary risks, AfDB highlighted that the Central Bank of Ghana will embark on serious monetary tightening during the year. Meanwhile, the multilateral development finance institution expects inflation to decline to single digits next year, ending 2023 at 9.1 percent.
The country is expected to benefit tremendously from rising commodity prices on the international market which is expected to narrow the current account deficit in the medium-term. The Bank Group also anticipates government’s revenue-enhancing measures to yield some positive results, beginning this year.
“Inflation is projected to surge to 15% in 2022 before falling to 9.1% in 2023. The Bank of Ghana is expected to adopt a tight monetary policy stance. The fiscal deficit is projected to narrow further to 12.8% of GDP in 2022 and to 10.3% in 2023, spurred by revenue-enhancing reforms. The current account deficit is projected to narrow to 1.6% of GDP in 2022 and 3.3% in 2023, on increased exports”.
The African Development Bank
According to the AfDB, Ghana’s inflation slowed from 9.9 percent in 2020 to 10.0 percent in 2021 as a result of low food inflation which accounted for 47.7 percent of total inflation.
The Bank Group further indicated that the country’s fiscal deficit narrowed from 15.2 percent of GDP in 2020 to 12.1 percent in 2021 due to increased revenue collection. According to AfDB, Ghana has committed its SDR allocation of $1billion from the IMF to finance the 2022 budget deficit.
GDP growth forecasts
Regarding the growth of the country’s Gross Domestic Product (GDP), AfDB expects Ghana’s positive outlook to culminate into a firm growth of 5.3 percent this year before dropping marginally to 5.1 percent in 2023.
The growth projections from the AfDB, anchored heavily on the Ghana COVID-19 Alleviation and Revitalization of Enterprises Support (Ghana CARES) Program which is expected to support the recovery of the economy.
The AfDB disclosed in its outlook that GDP growth was estimated at 5.0 percent in 2021, up from 0.4 percent in 2020. The strong expansion, according to the Bank Group, was supported by increased household consumption and commodity exports on the demand side and a rebound in services on the supply side.
The strong expansion in the economy last year compared to 2020 where the impact of the pandemic was at its peak, resulted in a decline in poverty rate in the country but that could not reduce the rate of joblessness.
“Poverty declined from 12% in 2020 to 11% in 2021, given GDP per capita growth of 2.3%, from a contraction of 1.7% in 2020. However, unemployment increased by 2.3 percentage points to 13.4% in 2015–21”.
The African Development Bank
AfDB however, warned that climate change—stemming from erratic rainfall, rising temperatures, drought, floods, a rising sea level, and tidal waves—presents significant threats to agriculture and energy, as well as climate-induced migration.
The Bank Group indicted that agriculture and energy (given its large dependence on hydropower) both depend heavily on rainfall and are thus, highly susceptible to fluctuating rainfall. Consequently, these drought-like conditions in the Northern Savannah Ecological Zone prompted migration to the south, exerting significant pressure on the coastal cities, the Bank Group disclosed.
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