Monday, September 14, 2009

August inflation eases to 19.65 percent

The headline inflation rate eased narrowly to 19.65 percent in August, the second consecutive fall in the year.

This fall is still above the end of year revised target of 14.5 percent.

Official data released by the Ghana Statistical Service (GSS) revealed that vegetables, cereals, bread, as well as fish and meat contributed the highest to the change - with yam, plantain and cassava being the major contributors.

A decreasing trend in the price of furnishing, household equipment, clothing and footwear in the no-food component of the Consumer Price Index (CPI) was also responsible.

Government statistician, Dr. Grace Badiako, briefing the media in Accra explained that food-crop availability and a bumper harvest of fish had helped to ease the food component of inflation, and prices are expected to fall again in September and October.

This, however, stands contrary to a prediction by the Centre for Policy Analysis (CEPA) that inflation will rise in September.

“We are in the harvest season and the expectation is that there will be a further easing in inflation for the next couple of month, all things being equal,” Dr. Badiako said in defence of the GSS outlook on inflation.

Inflation has been on the rise since November last year, remaining above 20 percent through to the seventh month.

Analysts contend that the country’s fiscal situation is still shaky and that dampens any favourable outlook on inflation figures.

Another factor is the current account deficit, which if not checked will speed-up depreciation of the local currency.

The Bank of Ghana’s prime rate, which was maintained in July at 18.5 percent, was among other means to put downward pressure on inflation.

This has informed credit conditions. Average lending rates were revised upwards by 1.5 percentage points in the first half to 32.75 percent, and are currently held within the range of 25.8 and 40 percent.

In its broad macroeconomic framework, government has revised the end-period inflation target from 12.5 percent to 14.5 percent but maintained the fiscal deficit target at 9.4 percent.

The Institute of Statistical, Social and Economic Research (ISSER) has expressed the view that external sector developments - such as falling remittances, crude oil prices - may result in government attaining just 84 percent of its targets for the year.

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