Inflation in Ghana is expected to fall for the fourth consecutive time in April 2023, extending the disinflation process that began earlier in the year. GCB Capital, a leading investment bank in Ghana, anticipates a significant drop in Consumer Price Inflation in April 2023, as the disinflation process continues through the first four months of the year.
The disinflationary trend is attributed to the sharp correction of the cedi, which has led to a reduction in petroleum prices at the pumps and eased price pressures across both the food and non-food baskets. GCB Capital further predicts that the deflation trend for the month-on-month headline, food, and non-food inflation will continue in April 2023.
In a statement released by GCB Capital, the investment bank stated, “We expect these favourable price effects and the favourable base pull to trigger another sharp drop in headline inflation to around the 36% level, all things equal, with the deflation trend for the month-on-month headline, food, and non-food inflation also set to continue in April 2023”.
Furthermore, GCB Capital anticipates that core inflation will ease alongside the headline number as the pass-through effects of the volatile items in the inflation basket wane. However, the bank warned that the price effects of the new revenue measures, which took effect on May 1, 2023, could stoke some inflationary pressures as pricing agents adjust general price levels to reflect the new and revised taxes.
Despite this, GCB Capital is optimistic that the favourable base pull and easing price pressures from the volatile items will moderate the impact of the new revenue measures and sustain the disinflationary trend. As a result, the investment bank expects the Monetary Policy Committee to hold the policy rate at 29.5% at its next meeting later in May 2023.
Moreover, GCB Capital believes that the declining trend in inflation will exert some downward pressure on nominal money market yields once the International Monetary Fund (IMF) deal is secured. The IMF deal is a critical component of Ghana’s economic strategy, and it is expected to provide the country with financial support to help address its fiscal challenges.
GCB Capital’s outlook for inflation in Ghana is positive, as the disinflationary trend is set to continue in April 2023. While the new revenue measures may lead to some inflationary pressures, the favourable base pull and easing price pressures from the volatile items are expected to moderate the impact of these measures and sustain the disinflationary trend. If this trend persists, it is likely to exert downward pressure on nominal money market yields, further bolstering Ghana’s economic recovery.