Inflation Report: Ghana’s Economic Recovery Seems On Track

I reported in my August Outlook Report that considering the numerous macro and micro economy related corrective actions that the government and the IMF had been working on, coupled with the fact the IMF package was also front-loaded, meaning that all the tough choices and actions were implemented earlier on in the program, all things being equal, the Ghanaian economy should begin to start showing some glimmers of positive results.

One such indicator that I referenced was Ghana’s double-digit inflation figures.

Well, I am here to report that after two years of persistent upward inflationary movements, the economies Producer Price Index (PPI), which measures the average change over time in the prices received by domestic producers for the production of their goods and services improved in the month of July. The PPI for Ghana reports the price indices with reference to September 2006, the base period. Ghana is still far off from its former single digit inflationary figures that it last enjoys in November 2012. But it is nonetheless a clear and strong indication of what the future holds.

Key points:

1. Rate of decline: The Ghana annual Producer Price Inflation fell sharply to 10.6 percent in July from 23.1 percent the previous month, the national statistics office said on Wednesday, representing a decline of 12.5 percentage point relative to the rate recorded in June 2015.

2. Highest year-on-year increase: The manufacturing sub-sector recorded the highest year-on-year producer price inflation rate of 13.5 per cent, followed by the utilities sub-sector with 7.3 per cent.

3. Lowest year-on-year inflation rate: The mining and the quarrying sub-sector recorded the lowest year-on-year inflation rate of 1.5 per cent.

4. Highest inflation rate: The monthly changes in the producer price index indicated that manufacturing recorded the highest inflation rate of 3.1 per cent, followed by the utilities sub-sector with 0.1 per cent.

5. Lowest producer inflation rate: The mining and the quarrying sub-sector recorded the lowest producer inflation rate of -18.3 percent.

Causative factors:

1. Reduced fuel prices

2. Sustained fiscal and monetary policies to stabilize the Cedi

3. Improved Donor Support

4. Increasing Investor Confidence, etc.

However, it is particularly important to note, that the inflation level is still relatively high compared with the regional average, indicating the scale of economic challenges facing the country.  But is the government is able to sustain the level of economic management discipline that they have exhibited in recent times, there should be no reason why we shouldn’t be able to bring inflation back down to single digits.

Ghana is currently under a three-year International Monetary Fund (IMF) program designed to restore fiscal stability.

Credit: Infoboxxdaily.com