GhanaMacroeconomic update

13 June 2022

Ghana’s May Inflation: A pain in the purse

In brief

  • Ronald Reagan – the 40th president of the United States (US) – said “inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man.”  Although harsh, the words ring as true in Ghana today as when they were spoken in 1978, and the pain is just as palpable.
  • As the Russia-Ukraine crisis is taking a toll on the world, its effects on emerging African markets like Ghana is more than ever imagined, as the country is facing new realities from a pandemic-induced crisis and fast-changing global trade dynamics with the warring Russia and Ukraine.
  • Ghana’s inflation reached an 18-year peak in May as it accelerated to 27.6% y/y from 23.6% in April, and its insidious effects are likely to continue weighing on business, consumer, and investor confidence.
  • While the osmosis of the Bank of Ghana’s (BoG) rate hikes from March and May is still ongoing, there is scope for more rate hikes in the near term as the previous hikes are not likely to halt the rise in prices.
  • The concern will be the implication of all of these for the country’s fiscal outlook, given that the pressure on the cedi could intensify in the coming days as investors continue to shy away from Ghanaian assets.

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