Ghana unlikely to record-high inflation in December - Economist

Economist at the University of Ghana, Dr Adu Owusu Sarkodie, says the country is not likely to see a rise in inflation ahead of the yuletide.

The economist believes that although Ghana’s inflation rate usually rises during the Christmas season, things may take a different turn as economic activities have returned after COVID-19 hit hard.

The inflation rate for September is 10.4 percent and this is the second consecutive drop in two months after it decreased from 11.4 percent in July to 10.5 percent in August.

Despite coronavirus distorting economic activities, Dr Sarkodie says the country making all activities continue will rather stabilize the country’s inflation rate.

“We know an election is coming in December and the government is going to spend. Christmas is coming and we are to spend it. But the year 2020 is very different from the previous years because of COVID-19. COVID-19 has come to cause economic disequilibrium. It means aggregate demand has fallen short of aggregate supply. So when we restore equilibrium, there’ll be no cause for inflation. Now the country is in a disequilibrium meaning that our expenditure has fallen below what has been produced,” he told Citi Business News.

He added, “So if the government can spend to revive the economy, during Christmas, individuals and businesses can spend, then there will be no higher inflation. Rather, the expenditure by households, government and firms will help to restore the equilibrium which will not cause inflation. So I am still optimistic that the Christmas and election spending will restore the economy into normalcy.”

Contrary prediction

In a different opinion, an economist, Dr Lord Mensah, has cast doubt on Ghana’s ability to achieve its end of the year inflation target of 8 plus or minus 2 percent.

In an interview with Citi Business News, Dr Mensah said “With the inflation dynamic, once you start drifting towards the end of the year, it will be difficult to come back. If you look at the seasonal dynamics of inflation, history will tell you that once we are getting to the end of the fourth quarter inflation goes up, because the Christmas activities are there, and now it is also an election year so there will be pressure on the exchange rate.”