Economist: Tough times ahead as inflation rises sharply
Inflation has been on an upward trend since September 2021, when it increased from the 9.7% recorded in August to 10.6%
The upward trend in inflation in the country over the past couple of months is likely to worsen the already high cost of living for Ghanaians.
An economist and sustainable banking consultant, Eugene Bawelle, said the next couple of months will be tough for Ghanaians, following the rising trend in inflation rate.
The rate of inflation has been on an upward trend since September 2021, when it rose from 9.7% in August to 10.6%. It rose further to 11% in October and increased again to 12.2% in November.
Inflation ended 2021 at 12.6%, missing the government’s target of 10%, and began the year on a six-year high with inflation at 13.9%.
Speaking in an interview with Graphic Business, Bawelle, who is a lecturer at Academic City University College, said the recent upward trajectory of Ghana’s month-on-month inflation reflected a reduction in the purchasing power of Ghanaians.
He said this meant that the real value of the same amount of money earned has fallen as the general price level over time increases.
“The effect is more pronounced for salaried workers and, to some extent, pensioners whose incomes are fixed, coupled with increased taxes with the pending E-Levy.
“The next couple of months will be really tough for the ordinary Ghanaian,” he said.
January inflation
The rate at which prices of goods and services increase (inflation) reached a six-year high in Ghana in January this year.
In the month under review, the rate of inflation rose to 13.9%, up from the 12.6% recorded in December 2021. This represents a sharp increase of 1.3 percentage points.
This is the highest inflation recorded in six years and it comes at a time when high deficit and debt build-up have combined to deny the country access to the international capital markets for the purposes of borrowing.
Inflation last surpassed 13% in December 2016, when it reached 15.4%.
The January 2022 inflation rate was announced by the Government Statistician, Professor Samuel Kobina Annim, at a press conference in Accra.
Main drivers
The main drivers of last month’s inflation was the housing, water, electricity, gas and other fuels subsector, which recorded the highest inflation rate of 28.7%.
This was followed by the transport and the food and non-alcoholic beverages subsectors, which recorded inflation rates of 17.4 and 13.7%, respectively.
The education service subsector recorded the lowest inflation – 0.9%.
Two divisions – housing, water, electricity, gas and other fuels (28.7%), and transport (17.4%) – recorded inflation rates higher than the national average of 13.9%.
Regional inflation
At the regional level, the overall year-on-year inflation ranged from 6.9% in the Eastern Region to 18.4% in Greater Accra.
The Greater Accra Region recorded the highest month-on-month inflation (5%), while the Upper West Region recorded a negative month-on-month inflation rate in January (-1.0%).
Food and non-food inflation
January’s food inflation (13.7%) was higher than December’s rate of 12.8% and the average over the previous 12 months (10.4%).
Food inflation’s contribution to total inflation decreased marginally from 45.2% in December 2021 to 44.2% in January 2022.
Overall, month-on-month food inflation was 2%, which was higher than the 12-month national month-on-month rolling average (1.1%).
Fourteen out of the 15 food subclasses recorded positive month-on-month inflation, with fruit and vegetables juices recording a deflation (-0.4%).
Non-food year-on-year inflation on average went up again in January 2022, compared to December 2021 (from 12.5% to 14.1%).
Two out of the 12 non-food divisions had a 12-month rolling average higher than the January 2022 year-on-year inflation for the divisions.
Inflation for imported goods was 11%, higher than the 10.4% recorded in December 2021, while inflation for locally produced items stood at 15%, also up from the 13.3% recorded in December.
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