Inflation will likely peak in first quarter of 2023 and ease thereafter – Dr. Ernest Addison

Dr. Ernest Addison

Governor of the Bank of Ghana (BoG), Dr. Ernest Addison has disclosed that the Central Bank expects inflation to ease in the second quarter of 2023.

Before that though, he says inflation will likely peak in the first quarter of the new year.

Speaking at the Chartered Institute of Bankers, Ghana 2022 Annual Bankers' Dinner [Governor’s Day], Dr. Ernest Addison said, “let me reiterate that these are not ordinary times. The Ghanaian economy is currently faced with enormous headwinds that have generated macroeconomic instability, reflected by widened twin deficits, and currency pressures and historically high inflation.

“Our latest forecast shows that inflation will likely peak in the first quarter of 2023 and ease thereafter, subject to continued monetary policy tightness and the deployment of tools to contain excess liquidity in the economy.

"This forecast would have to be monitored closely with potential upside risks including the VAT increase, utility price adjustment, pass-through of the recent accelerated depreciation of the cedi and the implications of the debt exchange.”

According to Dr. Ernest Addison, government recognises that times are hard and efforts are being made to turn the situation around, starting with the 2023 Budget, which has outlined measures to unwind the large fiscal deficits and reduce the debt levels.

He said the near-term adoption of an IMF programme will provide a balance of payments support to help close the wide financing gaps, boost investor confidence, and restore macroeconomic stability, a necessary condition for economic growth.

“To a large extent, the lingering effects of the pandemic has waned, and implementation of sound macroeconomic frameworks, amid easing geopolitical tensions should re-anchor inflation expectations, with positive spillovers on the domestic economy,” Dr. Addison indicated.

The Governor of the Central Bank further assured that necessary measures are being taken to ensure exchange rates are stabilised.

In addition, he disclosed that the regulatory and supervisory frameworks will be enhanced, while the bank’s risk management systems are closely monitored to ensure stability and prevent undue stress from the macroeconomic environment and debt exchange.