Inflation Risks Remain High

Risks to Ghana’s inflation continue to remain high and these are driven mainly by periodic increases in fuel and utility prices, currency depreciation and supply-demand gaps in the general economy, the Bank of Ghana (BoG) has disclosed.

Dr. Kofi Wampah, Governor of the Central Bank, who made this known at a press conference on Thursday in Accra, said inflation will only return to the target band of 9.5 percent towards the end of the first half of 2015.

According to him, headline inflation rose to 14.0 percent in February 2014 from 13.8 percent in January, drifting further from the target band of 9.5 percent.

The latest surveys conducted by the Bank of Ghana indicated softening business and consumer sentiments.

It said the softening confidence was associated with the increases in utility and fuel prices.

“Businesses were also less optimistic about achieving targets for capital outlay, employment, sales and revenue.”

While most Ghanaians are complaining about economic challenges, the BoG Governor indicated that there was relative increase in economic activities in the fourth quarter of 2013.

He admitted that the pace of general economic activity slowed down relative to the previous year.

Dr. Wampah said the main drivers of economic movement were port activity, monies banks’ lend to the private sector, domestic VAT, exports and sales of key manufacturing companies.

He however noted that global conditions were showing some marginal improvement largely on account of developments in the advanced economies, led by the US.

“The domestic economy will be impacted by these developments going forward. In particular, favourable commodity price developments in the international markets, as well as higher inflows could impact external sector performance. While gold and oil revenues may be flat, cocoa revenue is expected to improve.”

He also mentioned that the increase in the policy rate and the recent foreign exchange measures introduced in February have, to some extent, slowed down the pace of depreciation but the local currency continues its downward trend.