The rate of Inflation has had a 15 consecutive month downward trend, settling at a current figure of 9.38 percent in September, but the Centre for policy Analysis (CEPA) says a trend reversal is due.
The Executive Director of CEPA, Dr. Joe Abbey, who made a presentation on a mid-term report on the economy yesterday, noted that per CEPA’s forecast, this trend reversal in the trend of inflation should have happened as early as August or September 2010, but it didn’t happen because it was anchored by apparent gains made in food prices.
“Yes, CEPA expects a trend reversal to take place, but would still say we believe within the range in the programme, and that’s where we stand “
However, he noted with concern that “Our worry at CEPA is that Mozambique and others tell us that all is not well with wheat prices, so how did Ghana’s bread prices fall when others were rioting, when bad harvest in Russia led it to ban on the export of wheat, when the US Department of agriculture is also saying the US corn harvest is one of the worse they have seen, leading to high prices on corn,” he said.
The rate of inflation for September fell to 9.38 percent, compared to 9.44 per cent recorded in August. This means that the general price level in the country increased by 9.38 percent in September 2010, relative to September 2009.
Giving a highlight on the outlook of the economy for the rest of the year, CEPA noted that in respect of budgetary operations, the outlook points to a 2010 deficit, at least as large as that of 2009 —missing the target by a wider margin than in 2009.
On the expenditure side, it noted that on account of full implementation of the Single Spine Pay Policy Structure, the public sector wage bill for 2010 will increase by more than the 17 percent projected.
On the money market, CEPA projects that the declines in interest rates are likely to slow down considerably to a halt by the end of the year, as the year-on-year inflation rate, which troughed at about 9.4 percent per annum, begins to rise in the fourth quarter.
Other projections indicate that lending rates charged by commercial banks are expected to fall as the stock of non-performing loans (NPLs) continues to edge downwards and the Bank of Ghana (BOG) succeeds in its effort to work with the commercial banks to shorten the lag from the policy rate to commercial banks’ lending rates.
On trade and payments, it noted that with gold prices touching historical peaks in the third quarter of this year with trends expected to persist in the fourth quarter, export earnings of about US$ 3.5 billion was projected for the year.
Furthermore, CEPA noted that in addition to the uncertainties about the prices of petroleum and petroleum products on world markets, there have been developments in respect of prices of grain wheat and corn which also give some concern for the merchandise trade deficit and domestic inflation.
