Fitch Solutions is forecasting inflation in Ghana to average 40.6% in 2023, above the estimated average of 31.9% year-on-year in 2022.

This, it said, will severely constrain purchasing power for households in Ghana. 

Over 2024, the UK-based firm is however projecting inflation to average 18.2% year-on-year, which will allow consumers to start prioritising more non-essential categories.

“The slowing of food inflation will be particularly beneficial for consumer spending on other goods and services given that food and non-alcoholic drinks account for more than 40% of total household spending in Ghana it stated in a report dubbed “Ghana Consumer Outlook: Inflation to heavily dictate the trajectory of spending over half-year 2023 and 2024”.

Fitch Solutions, had earlier stated a disinflationary process for Ghana in 2023, forecasting an average inflation of 33.4%.

Regarding monetary policy, Fitch Solutions said it expect the Bank of Ghana (BoG) to hold its benchmark interest rate at 30.00% until the fourth quarter of 2023, when it is expected to commence a monetary easing cycle as inflation subsides towards the 20% mark while economic growth weakens.

“The BoG is forecast to cut the policy rate by 200 basis points to 28.00% by the end of 2023, and a further 600 basis point cut over 2024, to end the year at 22.00%. Nevertheless, the interest rate will remain far above pre-Covid levels (at 16% in 2019), making debt servicing more expensive for Ghanaian households and therefore reducing their ability to spend on consumer goods and services”.

Additionally, it said the weakness of the cedi is making imports more expensive, placing additional pressure on household budgets.

Inflation for August 2023 fell to 40.1%

The year-on-year inflation for the month of August 2023 fell to 40.1% from the 43.1% recorded in July 2023, the lowest in 12 months.

According to data from the Ghana Statistical Service, Food inflation witnessed a decrease to 51.9% in August 2023, from the 55.0% the previous month.

Non-Food Inflation also dropped by 2.9% to 30.9% in August 2023.