Prices are still rising despite economic recovery - Economist
He explained that the rate of increase in prices has reduced, but that’s not the same as things getting cheaper.
“It seems to me that the financial and the monetary side of the economy has performed better, and the real side seems to be lagging.
“There’s a disconnect between how people are perceiving the economy and what the macro numbers are telling us, he said.
He explained that while inflation is coming down and the Producer Price Index (PPI) has dropped from around 18 to 10 per cent, that doesn’t mean prices are falling.
“Prices are still rising. They haven’t declined. The rate of increase has reduced, but that’s not the same as things getting cheaper,” he said.
“The currency has strengthened, yes, but look at the other components of production—tariffs are going up, wages are not going down, and domestic production costs keep rising,” he explained.
He said that the overall economic picture looks better, largely because government has acted quickly to put its finances in order.
“Government has done well on the fiscal side. Our reserve position has improved, partly from policy direction and partly from luck with global prices of our exports.
“But when you dig deeper, it’s clear that the real economy, the part that touches people’s lives every day, isn’t recovering at the same pace,” he told Joy News on Thursday, June 19.
Recently, the Governor of the Bank of Ghana (BoG), Dr Johnson Asiama, explained why Ghanaians may not be experiencing price reductions on the market despite the appreciation of the Cedi.
He explained that people stock their goods at a higher exchange rate, and so naturally, even with the appreciation of the Cedi, it takes a while for consumers to see that adjustment.
Dr Asiama, however, assured Ghanaians and the general public that they would soon see adjustments in prices of goods and services so long as there is competition.
This followed the appreciation of the Cedi against the Dollar.
Asked when Ghanaians are to expect price predictions on the market following the stability of the local currency, Dr Asiama answered during the 124th Monetary Policy Committee (MPC) press conference in Accra on Friday May 24 that “You can understand that some people stock their goods at a higher exchange rate, and so naturally, even with the appreciation, it takes a while for you to see that adjustment.
“However, rest assured that you will see the adjustment certainly so long as there is competition, so long as it is not a monopoly, and we will see that kind of phenomenon very soon.”
Asked again whether the appreciation is sustainable, he answered, “The Cedi appreciation has to be put into proper context. Much as you want to have Cedi stability in nominal terms, the important thing here is to ensure that in real terms, the Cedi is not appreciating persistently. And so the MPC went into a lot of deliberations, looked at the real movement of the exchange rate, and we think that where we are now, we don’t have that problem of real appreciation that would adversely impact our competitiveness.
“So, for now, we think that the trend is in line; we are observing it continuously, though. But the appreciation is largely driven by the markets, it is not something that the central bank is using its reserves for. If you look at the data pack we have put out, you can see that our reserve programme is growing, so we are not using our reserves to intervene in the market, therefore, the appreciation you are seeing is driven by economic policy stance of the monetary policy, by international flows. So yes, it is appreciation; however, for us, it is about maintaining exchange rate stability .”
Prior to his answers, Dr Asiama had announced at the press conference that the MPC has maintained the Policy Rate at 28 per cent.
Dr Asiama stated, among other things, that headline inflation has declined consecutively in the first four months of the year, driven by both food and non-food inflation.
“The external sector has continued to improve, with a record provisional current account surplus of US$2.1 billion in the first quarter of 2025, driven mainly by higher prices and increased production volumes of gold and cocoa, and strong remittance inflows. The current account surplus, together with net outflows in the capital and financial account, resulted in an overall Balance of Payments surplus of US$1.1 billion. The strong external performance resulted in significant reserve accumulation. Gross International Reserves (GIR) amounted to US$10.7 billion in April 2025, equivalent to 4.7 months of import of goods and services. Broadly, the external sector outlook remains favourable, largely anchored on expectations of increased gold and cocoa export receipts, as well as inflows from remittances.
“The cedi has rebounded strongly against the major trading currencies driven by a combination of factors, including tight monetary policy stance, ongoing fiscal consolidation, record reserve accumulation, strict enforcement of foreign exchange market rules, and improved market sentiment. In the year to May 21, 2025, the cedi had appreciated against all the major currencies – 24.1 percent against the US dollar, 16.2 percent against the British pound, and 14.1 percent against the euro.
“The latest forecast points to continued easing of inflationary pressures on the back of tight monetary policy stance, exchange rate stability, and fiscal consolidation. Inflation is expected to ease faster towards the medium-term target in the first quarter of 2026 as opposed to the second quarter as earlier envisaged, barring unanticipated shocks. Despite these positive developments, the Committee observed that the current level of inflation remains high relative to the medium-term target and will require maintaining the tight stance to reinforce the disinflation process. Under the circumstances, the Committee, by a unanimous decision, maintained the policy rate at 28 percent,” he said.
