According to the EIU, SSA inflation is estimated to average 8.1% in 2021 before falling to 8.0% in 2022. The inflationary trend across SSA is a mixed bag. Four of the SSA countries under our review recorded higher inflation while two posted a decline. Food price movement and transport costs largely determined the inflation trend.
Of the SSA countries under our review, only the Bank of Ghana reduced its benchmark interest rate to support the country’s economic recovery.
Inflation Outlook in Q3
Whilst the controversy rages on whether the current inflation is reflective of reality, we must bear in mind that the CBN has been consistent in its contention that an inflation rate above 12% is growth retarding. It has also been resolute in its belief that a stable exchange rate is an antidote to rising inflation.
Inflation has its seasonality features and core inflation, which discounts seasonal factors from headline inflation, is expected to be relatively mild this time. Whilst the planting season effect will take a toll on prices in the next quarter, one feature of the planting season this year is that farmers who normally consumed only grains are now consuming seeds and grains.
Seed consumption reduces the planting stock and slashes the harvest of the next season. Therefore, we should expect some shortages in food output next quarter in addition to higher logistics costs and ultimately higher food inflation in Q3.
