BoG Governor warns Middle East crisis could fuel inflation in Ghana
Ghana faces a mix of potential gains and renewed economic risks from the escalating Middle East crisis, Bank of Ghana Governor Johnson Asiama said Wednesday, warning that higher energy and fertiliser costs could fuel inflation.
Speaking at the opening of the central bank’s 132nd Monetary Policy Committee meeting, Asiama said the conflict had created competing pressures for the Ghanaian economy.
Higher gold prices could boost Ghana’s export earnings, support the accumulation of foreign exchange reserves and increase government revenue, he said.
But rising energy and agricultural input costs could also feed into transportation, production and food prices, putting renewed pressure on inflation.
“The conflict’s trajectory has become highly uncertain, and risks to global growth and inflation have become more pronounced,” Asiama said.
“Beyond the crude oil price shock, all forecasts show that the global growth outlook has deteriorated considerably since the conflict began.”
The Bank of Ghana said global growth forecasts had been revised down, with the World Bank and United Nations projecting growth of 2.5 percent, below pre-pandemic levels and the International Monetary Fund’s April estimate of 3.1 percent.
The central bank also pointed to weaker per-capita income growth in emerging and developing economies, while growth forecasts for the Middle East and North Africa region have undergone cumulative downward revisions of almost three percentage points.
Meanwhile, global inflationary pressures are rising as energy and agricultural input prices increase.
Brent crude, which was trading above $85 a barrel when the Monetary Policy Committee last met, reached about $107 a barrel last week, according to the Bank of Ghana.
The bank said the increase came amid depleted global inventories, leaving international markets with less capacity to absorb further supply disruptions.
The developments could also complicate Ghana’s monetary policy outlook.
Several central banks that had begun cutting interest rates have paused or reversed their easing cycles, while financial markets are pricing in the possibility of higher US interest rates.
Tighter global financial conditions and a stronger dollar could put pressure on emerging-market currencies, including Ghana’s cedi, the central bank said.
Asiama said the MPC would assess whether the changing balance of risks warranted a shift in monetary policy or whether there was still a case for maintaining the policy rate at its current level.
The MPC is expected to consider the competing effects of the global shocks on Ghana’s inflation and economic growth as it determines its next policy position.
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