Projections by several market watchers led by Databank Research have predicted that headline inflation will record a downward slide in the coming months before the year ends.

According to the projections, the rate is expected to peak this quarter; however, the team is predicting a bullish forecast, predicting that 2023 could end with a consumer inflation rate much lower than the 54.1% recorded at the close of 2022.

Databank Research explained that it is expecting inflation to remain high until the end of the first quarter of the year due to renewed inflationary pressures, before beginning to follow a disinflation path for the rest of 2023 with a year-end consumer price index rate of 19.5%. “We expect headline inflation to end FY23 at 19.5%,” said the Research arm of Databank in its Quarterly Strategy Report.

Consumer inflation decelerated marginally to 53.6% on a year-on-year basis in January, from a more than 20-year peak in December 2022– marking the first time since May 2021 that inflation dipped, according to official figures from Ghana Statistical Services (GSS).

The recent drop, according to GSS, was driven largely by a fall in non-food inflation which dropped to 47.9%; with food and non-alcoholic beverages being the major contributors to overall inflation, while food inflation in January, mostly from imported sources, rose slightly to 61%.

Databank expects the favourable base effect and complementary monetary policy decision to alleviate inflationary pressures, with the impending US$3billion International Monetary Fund (IMF) deal also expected to give some respite to the cedi; consequently limiting its pass-through effect on inflation beyond the first quarter.

Inflation to Remain Stable

Similarly, analysts at GCB Capital Research expect that despite some renewed price pressures, inflation will remain stable in the first quarter of 2023. The firm believes that the worst of inflation may have already passed, following a continuous increase for 19 months.

While interventions in revenue and fluctuations in the cedi and petroleum prices could cause inflation, GCB Capital Research expects the impact to be moderate. “We expect a sharper cooling of inflation from Q2-2023, helped by easing price pressures, favourable base drift and complementary monetary policy,” said GCB Capital Research in a note following the announcement of the latest inflation figures.

GCB expects that favourable trends in the global oil market may contribute to sustained lower petroleum prices, which it believes could lessen the impact of rising transport fares on inflation.

While welcoming the forecasts that petrol and diesel prices will decrease by 7.1% and 10.8% respectively during the second pricing window in February, Apakan Securities remains cautious about the volatility of crude oil prices on the global market.

“Despite the announcement by the United States this week to release 26 million barrels of oil from its strategic reserve, the cut in Russia’s oil output in response to the price cap imposed by the West and the reopening of China, the largest oil importer, balances the direction of prices for crude oil to the upside.”
GCB Capital Research

Ghana has been battling inflation for some time now. However, Ghana’s inflation in 2022 and early 2023 was over the roof.

In Ghana, the most important components in the Consumer Price Index (CPI) are food and non-alcoholic beverages (43 percent of total weight); housing and utilities (10 percent); transport (10 percent) and clothing and footwear (8 percent). The index also includes: education (7 percent); restaurants and accommodations (5 percent); alcoholic beverages, tobacco and narcotics (4 percent); and information and communication (4 percent). Recreation, sports and culture; furniture, household equipment and maintenance; personal care, social protection and miscellaneous goods and services; health; and insurance and financial services account for the remaining 9 percent of total weight.

The recent spikes in inflation rates have been biting consumers very hard. As such, predictions of a decline are expected to relieve consumers a bit.