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Inflation Projected To Rise2 min read

Inflation Projected To Rise<span class="wtr-time-wrap after-title"><span class="wtr-time-number">2</span> min read</span>

Ghana’s Inflation is projected to climb in the next two months due to the unfavorable pricing effect of the three new taxes; Excise Duty and Excise Tax Stamp, the Income Tax and the Growth and Sustainability Levies, as well as the recent increase in utility tariff.

That is the latest forecast from IC Research Africa.

After four consecutive months of declines in headline inflation, Ghana’s disinflation faced a setback in May 2023.

In May, inflation rose to 42.2 per cent, up from 41.2 percent in April.

This marginal rise was mostly related to an increase in food inflation during the period, but according to IC Africa’s Ghana May 2023 inflation report, this trend will continue.

According to IC Research, while the 1.0 per cent increase in headline inflation was unexpected, it is not surprising.

It cited parliament’s passage of the Excise Duty and Excise Tax Stamp, the Income Tax and the Growth and Sustainability Levies and the 18.4 percent and the 9-15 percent hike in water tariffs respectively as key factors.

The analysis suggested a spillover of price pressures into June 2023, consistent with its conclusion that the near-term outlook is clouded by elevated pricing expectations from IMF-supported price sensitive measures.

“With lagged impact of the higher taxes, recent hike in utility tariffs, and the elevated services and food price pressures, we do not rule out a marginal uptick in headline inflation in June 2023.”

“The doubling of the month-on-month inflation in May 2023 emphasizes the unfavourable price effect of the new taxes amidst the seasonality in agricultural supply. Specifically, we flagged the price effects of the new taxes and the unfavourable seasonality in agrarian output as upside risk which we expected to slow the disinflation rather than reverse the downturn”, the report further added.

But these pressures are expected to persist over the next two months, owing to the expectation that manufacturers and distributors may stagger price adjustments in response to decreasing market circumstances.

“In our view, this pressure could linger over the next 2-months mainly due to our expectation that producers and distributors would stagger the price adjustment amidst the softening demand conditions”, the report added.

A Business Desk Report

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