Business News Fri, 16 Apr 2021

Inflation seen falling in April, but upside risk high - Analysts predict

Analysts are predicting a fall in consumer inflation in April 2021 on the back of lower food inflation, but warn that upside risk to especially non-food inflation remains high.

After declining in January to 9.9 percent, inflation rose in February to 10.3 percent, above the upper band of the central bank’s medium-term target of 8–10 percent, driven mainly by non-food prices, according to data from the Ghana Statistical Service (GSS). The March inflation rate stabilised at 10.3 percent.

“We believe that the favourable base effect, which will work through the food inflation, will offset the upside risks to non-food inflation in April and result in a decline in headline inflation for the month,” Courage Kingsley Martey, senior analyst with Databank Research, said in an interview with Business24.

The Head of Price Statistics at the GSS, John Ajaho, also said in an interview, “Since December, food inflation has been on a dip, and from this trend, all things being equal, we should expect another dip next month [April]. However, a rise would demand that government put in some policy measures to relieve consumers.”

Non-food inflation continued to increase from 7.7 percent in January to 10 percent in March. The March rate was the highest annual rate of increase in prices of non-food items since July 2019, driven by housing costs, which recorded an inflation rate of 29 percent.

“With the prospect of higher ex-pump prices, upward adjustments in utility tariffs and higher taxes, there is an upside risk to non-food inflation which could push up the headline inflation—if food inflation does not decline sufficiently to offset the upside risks,” said Mr. Martey.

“In effect, we remain cautious on the inflation outlook on account of the upside risks to non-food inflation.”

Meanwhile, the Bank of Ghana has forecast headline inflation to return to its target band in the second quarter of 2021.
Source: business24.com.gh
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