The Ghana Statistical Service last Wednesday announced the country’s inflation for May 2024 declined to 23.1%, a 26-month record low and the second consecutive slowdown in the rate after experiencing fluctuations since November 2023.

But while this hints at signs of a possible economic rebound, the country still faces a herculean task in meeting its end-of-year inflation target of 15% and falling within the Bank of Ghana’s predicted close-of-year bandwidth of between 13% and 17%.

The country has seen a spike in month-on-month inflation from 0.8% in March 2024 to a 10-month high of 3.2% for May 2024 despite the general inflation slowdown a situation research lead at GCB capital, Courage Boti believes reflects the persistence of underlying pressures.

“Inflation is declining as expected but probably at a slower pace than the consented market outlook and my personal estimate. For the year-on-year base effect is playing a big role, but for the period, of May and April this year, you can see clearly that the underlying pressures are still very much there; the impact of the cedi depreciation and the impact of fuel price hikes”, he told Starr News.

Government Statistician, Professor Samuel Kobina Annim who attributed the spike in Month-on-Month inflation to transportation has proposed a dialogue to permanently dealing with the hikes in fuel prices.

“We are seeing a transport month-on-month inflation of 10.5% when overall month-on-month inflation is 3.2% and we all appreciate how transport permeates across the other items in the basket. So, a conversation that must be on the table is how do we ensure the consistent but slow increases in prices at the pump will possibly slow down and see reduction going forward.”, he told journalists.

But Courage Boti says the recent tilt in non-food items driving inflation is a reflection of the exchange rate pressures and their effect on pricing behaviors.

“There is also a utility tariff hikes that is to take effect from the first of July. Its impact will reflect along the way and if we do not get a handle on it, the lag impact and the transmission will ultimately play a role in the outlook inflation going forward.”, he further warned.

But while consumer price has moved from 200.5 in December 2023 to 220 in May 2024, representing a 9.7% inflation within the first 5 months of the year and the looming pressures of utility and potential lagged effect of the cedi’s slide against the dollar, Courage Boti is hopeful a sub 20% end of year inflation is possible even though the BoG target remains shaky.

“Well, I think under 20 is still possible. How low it could go? Will it get to 17 or 18? With all of the dynamics now that we talk about, I think the pace of decline will be moderated from now on. But I am not sure about the midpoint of the Central Banks’ forecast, which is about 15%. I think we will likely get close to the upper teens. So, I maintain my forecast of 17 plus or minus, 100 basis points.”, he concluded.

Source: Ghana/ Kojo