Inflation to end year at 20.8% – Fitch
Ghana’s inflation rate is set to continue its decline, with projections indicating a year-end figure of 20.8% for 2024, according to a recent report from Fitch Solutions. The UK-based firm’s Ghana Inflation 2024 Consumer Outlook highlights the country’s ongoing efforts to tame inflation after the sharp spikes experienced in recent years.
Inflation has already fallen significantly, dropping to 20.9% in July 2024 from its peak of 54.1% in December 2022. Fitch forecasts an average inflation rate of 22.1% for the entirety of 2024. However, the report cautions that while inflation is easing, it remains notably higher than pre-pandemic levels, when inflation averaged 12.4% between 2015 and 2019.
Looking ahead to 2025, Fitch expects inflation to continue its downward trajectory, predicting a further decline to an average of 16.2% year-on-year. Despite the easing inflationary pressures, Ghanaians will still face higher costs than they were accustomed to prior to the COVID-19 pandemic.
Impact of food prices on consumer spending
One of the key drivers behind the decline in inflation is the continued fall in food prices, which is expected to provide relief for households. Food and non-alcoholic drinks account for over 42% of total household spending in Ghana, and the easing of food inflation could allow consumers to allocate more of their income to other goods and services.
Fitch’s report underscores the importance of this trend, noting that the slowdown in food inflation will be particularly beneficial for household consumption. Lower food prices could offer a much-needed boost to consumer spending in other sectors, providing some cushion for an economy that has faced significant inflationary challenges in recent years.
Rising pressures in key sectors
Despite the positive outlook for food prices, other segments of household spending are experiencing rising inflationary pressures. Fitch Solutions warns that inflation in essential categories such as housing, utilities, and transport has been on the rise, posing potential risks to consumer spending.
Transport inflation, for instance, grew sharply from 5.6% year-on-year in January 2024 to 18.1% in July 2024. Housing and utilities also saw a rise in inflation, increasing from 22.6% to 28.6% over the same period. These increases in core living expenses could offset some of the relief provided by lower food prices, and potentially slow down spending in other areas of the economy.
Consumer outlook for 2024
In summary, while Fitch Solutions’ report paints a relatively optimistic picture of inflation in Ghana continuing to ease, it also highlights significant challenges that remain. Although the decline in food prices is a positive development, the rising costs of transportation, housing, and utilities will likely limit the overall impact on household budgets. As inflationary pressures moderate, the key question for Ghana will be how quickly the broader economy can stabilize and how much relief the easing of inflation will bring to the average consumer. The report serves as a reminder that while progress is being made, the inflationary environment remains a crucial factor shaping the economic landscape in 2024 and beyond.
