In April 2024, experts predict that inflation, the rate at which prices rise, will drop slightly to 24.6% compared to March’s 25.8%. However, on a month-to-month basis, prices are expected to rise by 1.4%.
According to IC Securities, a financial analysis firm, it adjusted its prediction for the end-of-year inflation rate to 16.9%, give or take 1.0 percentage points. This is a change from their previous forecast of 16.1%, also with a margin of 1.0 percentage point.
“Our estimations suggest that the 10.6% year-to-date depreciation of the Ghanaian Cedi could elevate Ghana’s annual inflation profile by between 80 basis points – 100 basis points at the end of 2024 as the FX [foreign exchange] pressures pass through higher transport fares, utility tariffs, and imported items.”
IC Securities
In March 2024, the Consumer Price Index (CPI) data revealed a notable shift in the inflation landscape, with transportation costs experiencing the most significant increase in their contribution to overall inflation. Transport inflation jumped from being the 11th most impactful item to the 8th position.
Despite concerns about inflation edging higher, financial analysis firm IC Securities pointed out that the surge in March 2024 was largely anticipated due to unfavorable base effects from the previous year.
IC Securities maintains its outlook for a somewhat irregular decline in inflation throughout 2024, characterizing the March 2024 spike as a temporary deviation in the overall trend of decreasing inflation.
In March 2024, inflation accelerated to 25.8%, marking a 260 basis point increase from the previous year. While slightly lower than the projected 26.0% and the market consensus of 26.4%, this uptick underscores ongoing concerns about inflationary pressures.
“In our view, the upsurge in the March 2024 annual inflation mostly reflects the impact of unfavorable movements in the CPI level against the comparable month of 2023 with FX and energy prices adding renewed upside.
Specifically, we observed a 0.2% month-on-month decline in the CPI in March 2023 whereas the March 2024 CPI increased by 0.8% month-on-month. This contrasting CPI movement created an unfavorable base effect in the computation of the year-on-year inflation for March 2024, underpinning the upsurge.”
IC Securities
Long-Term Inflation Outlook
Moreover, in the long term, Fitch Solutions projected an average inflation of 19.0% for Ghana in 2024.
The London-based firm suggests that the anticipated decrease in inflation will ease the financial strain on households and enhance consumers’ buying power.
Mike Kruiniger, a Senior Country Risk Analyst at Fitch Solutions, noted that while March 2024 saw a rise in inflation, this can be largely attributed to effects from the previous year. He anticipates that inflation will revert to its downward trajectory in the near future.
“So lower inflation will alleviate pressure on household finances and increase the purchasing power that will spur economic growth”.
Mike Kruiniger
Also, the International Monetary Fund revealed in its Regional Economic Outlook for Sub-Saharan Africa that Ghana’s inflation is expected to nose-dive to 11.5% on average in 2025,
The IMF also forecasted a Gross Domestic Product (GDP) growth rate of 4.4% in 2025, compared to 2.8% in 2023. This projection suggests a forthcoming expansion in demand and supply within the economy next year.
The IMF noted that headline inflation in sub-Saharan Africa has been on a downward trend since reaching its highest point in November 2022, although the pace of decline varies from country to country.
“Even among countries with a marked decline in inflation, only a select few have reduced policy interest rates over the past 12 months (Botswana, Ghana, and Mozambique). The majority have opted to continue tightening or maintain elevated policy rates, even after inflation has passed its peak.”
IMF
As such, April 2024, may see a slight drop in inflation to 24.6%, with a 1.4% monthly increase. Forecasts suggest gradual declines, easing financial strain, boosting purchasing power, and spurring economic growth.
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