Ghana’s ailing economy: A look at the inflation trend in 2022

Ghana’s economy has overly performed poorly this year and with just three months left to the end of year, it doesn’t seem like there’s light at the end of the tunnel.

Prices continue to soar for both food and non-food items of which transport, housing, utilities, and prices of imported goods are rising more than domestic ones on the back of a sliding currency.

The Bank of Ghana was hopeful of a positive economic situation for 2022, by setting the inflation target for the year at 8 +/- 2 percent.

With the previous year recording inflation rates of as low as 7.5 percent in May, the government was hopeful of a bounce back this year. However, the situation seems to have taken a downward turn.

January began the year with an inflation rate of 13.9 percent, picking up with just a minimal 1.3 percent above December’s 12.6 percent.

Influenced by food and cost of fuel, the inflation rate increased by 1.8 percentage points to record 15.7 percent in February.

At this time, the tensions between Russia and Ukraine were fledgling, and the rise in the rate confirmed predictions by economists and stakeholders that prices of fuel and food will continue to rise following the war between the two countries.

Prior to the announcement of the February inflation rate, Ghanaians had started feeling the effect of the tensions on the price of fuel, which in turn led to an increase in transport fares.

This trend continued into March, with transport including fuel pushing the inflation rate to 19.4 percent.

The country’s inflation rate took a sharp turn in the month of April. From 19.4 percent in the previous month, April saw a 4.2 percentage point jump in the inflation rate to clock 23.6 percent.

The next two months, May and June, remained in the 20s, recording 27.6 percent and 29.8 percent respectively.

Still, the main drivers of the inflation for these months were food, transport, housing, water, gas and electricity, mostly recording inflation rates higher than the national average out of the 13 divisions for the computation of inflation.

The upward trend in the inflation could only get worse by zooming up to 31.7 percent in July.

Currently, inflation stands at a record of 33.9 percent in August; a rate some analysts say is the highest in 21 years.

Many economists and analysts have suggested several ways by which the government can stem the inflation including the domestic production of food and the review of the Planting for Food and Jobs program.

On their part, the Bank of Ghana has continuously increased the Monetary Policy Rate as a means to check the situation, with the most recent measure being an increase to 300 basis points after an emergency meeting.

But despite all of this, economists and analysts still insist that the country is not going to be out of the woods anytime soon.

International ratings agency, Fitch Solutions also expects Ghana’s inflation rate to remain high in the near term in the face of spiking global food and fuel prices, coupled with the continuing investor concern over the country’s large fiscal deficits which is putting downward pressure on the Cedi.

According to the agency, Ghana’s consumer price inflation will average 25 percent and 15 percent in 2022 and 2023 respectively.

The rising inflation has become a shared trend worldwide. The overall inflation rate in Sub-Saharan Africa is expected to grow to 12.2 percent following the rally in crude oil prices, amidst the face-off between Russia and Ukraine.

According to the International Monetary Fund, Sudan has the highest inflation rate in Africa as of 2022. The rate reached roughly 245 percent owing to a long-running economic crisis and political instability.

Zimbabwe ranked second on the list of African countries with the highest inflation, averaging 90 percent.

Ghana was sixth on that list averaging a 16.3 percent.

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