While Ghanaians were huddled near their televisions and radio sets on Wednesday, impatiently awaiting the official results of the December 7 general elections, a major good news about the economy passed virtually everyone by.
The Government Statistician, Professor Samuel Annim announced that consumer price inflation for November was 9.8 percent. This is pivotal in that it is the first time that the headline inflation rate has fallen below 10 percent since COVID 19 pandemic hit in March. The latest data shows 300 basis points fall from the 10.3 percent registered in October. Importantly it is the fourth consecutive month of falling consumer price inflation and it raises expectations that the Bank of Ghana’s forecast of inflation falling to 8.0 percent – the median of its target band of between six and ten percent – by the second quarter of 2021 being fulfilled.
However the structure of inflation remains unusual, reflecting the distortionary effects of the COID 19 pandemic on the economy.
For one thing inflation in imported goods was just 5.6 percent – reflecting the unprecedented stability of the cedi this year which has depreciated against the United States dollar by barely 3.2 percent since the beginning of the year – but domestic inflation was 11.5 percent reflecting the lingering effects of the pandemic and the requisite public policy response on local supply and value chains. Usually it is imported inflation, caused by cedi depreciation that is the primary driver of consumer price inflation rather than the other way round.
The other unusual thing is that even in the wake of the recent national food harvest during the third quarter of the year, food inflation at 12.0 percent was still higher than non-food inflation of 9.2 percent in November. Again cedi stability and supply chain disruptions are seen as the root causes of this situation.
At the regional level overall year on year inflation ranged from 3.4 percent in the Upper West and Volta Regions to 15.2 percent in the Greater Accra Region.
Customarily, inflation spikes in December due to increased consumerism during the end of year festivities but this is expected to be muted because of the general slump in economic activities at the height of the coronavirus outbreak which has caused the economy to be operating below capacity. Economists therefore expect that inflationary pressures in December will be less intense than usual, raising hopes that Ghana could end the year with single digit inflation.