GCB Capital is predicting the continuation of the disinflation trend but at a slower pace.

Commenting on the December 2023 inflation, it said the ongoing macroeconomic reforms and favourable base effects have supported the disinflation process, underscoring the steep decline in inflation in 2023.

“However, the cedi remains relatively stable, and the anticipated inflows from the IMF and the World Bank after the first review is completed should shore up the FX [foreign exchange] reserves and considerably improve FX liquidity conditions on the domestic market. Cost pressures from petroleum prices and other categories of imports should also remain fairly tame, given the outlook for the exchange rate, oil market outlook and the easing inflation conditions”, it stated.

It added that the risks to inflation are still pronounced.

Furthermore, it said the favourable base effects should wane through quarter 1, 2024, resulting in a much slower pace of disinflation through April 2024.

“We also flag risks to inflation from potential election induced expenditure overruns to inflation in 2024, which, if not contained, can stoke renewed demand-driven price pressures”, it pointed out.

It also stated that the imposition of Value Added Tax (VAT) on domestic electricity consumption in 2024, if maintained, also represents a risk to the near-term outlook for inflation.

“Against this backdrop, we expect headline inflation to inch lower in January and February 2024 before reversing course to close Mar-23 around the 24.60% due to base effects. However, we expect the disinflation trend to resume from April 24, all things being equal”, it concluded.

Inflation ended 2023 with a rate of 23.2% (December 2023) from the 26.4% recorded in November 2023.

By this, the government ended the year with an inflation rate below its revised target of 31.3% captured in the 2024 National Budget presented to Parliament in November last year.