We expect Ghana’s inflation to remain high in near term – Fitch Solutions

Fitch Solutions has predicted the country’s consumer price inflation 2024 will average 25 per cent and 15 per cent in 2022 and 2023, respectively.

“We expect that Ghana’s inflation rate will remain high in the near term in the face of spiking global food and fuel prices and as continuing investor concern over the country’s large fiscal deficits puts downward pressure on the cedi,” Fitch Solutions, said in its latest report on Ghana,” it said.

Ghana’s inflation rate is currently at 31.7 per cent influenced by high rising food and fuel costs.

Fitch Solutions in its report titled “Ghana’s Private Infrastructure Investment Set for Medium-Term Recovery,” said inflation would threaten to undermine project revenues and thereby exacerbate revenue risks for both domestic and foreign investors.

It said increased inflation will likely impact the price of construction materials, increase project costs and push developers to delay investments.

“Ghana imports large volumes of construction materials, with domestically produced cement amounting to less than 60 per cent of domestically consumed cement throughout the largest part of the past decade,” Fitch Solutions said.

It said in 2021, Ghana’s trade deficit for iron and steel products were estimated to have exceeded $1.2 billion, up from an estimated deficit of over $780 million worth of the two products in 2020.

“In light of the Ghanaian construction industry’s reliance on materials imports, we expect that the cedi’s weakness will add to upward pressures on construction materials prices from existing supply chain disruptions,” Fitch Solutions said.

On the local currency, Fitch Solutions said “We expect weakness for the Ghanaian Cedi to persist throughout the near term, as we currently forecast the currency to depreciate by 43 per cent and 30.1 per cent against the dollar in 2022 and 2023, respectively.”

The currency’s weakness, it said would keep revenue risks elevated for foreign investors reliant on revenue streams in local currency.


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