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Cost Of Living Set To Improve, Inflation, Interest Rates To Drop Further
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Ghanaians are set to soon see a marked improvement in their living standards if government continues with its growth oriented and private sector-friendly policies, economists have observed.

According to them, barring any unexpected shocks, workers, traders and businesses will enjoy lower prices for goods and services amidst reduced interest rates on loans as there are increased expectations of a further drop in the Bank of Ghana’s policy rate.

Analysts say Ghana‘s inflation outlook is good and promising on account of government’s ongoing efforts to restore and sustain macroeconomic stability through enhanced fiscal and monetary discipline and the shifting of focus of its economic management from taxation to production.

The Institute for Fiscal Studies (IFS) is confident that government could more than achieve its inflation target of 11.2 for end-year 2017 since “in the month that the budget was presented, the inflation rate was 12. 8 per cent and therefore between March and December this year, government could do better lowering inflation further below the 11.2 per cent mark.”

Ghana's inflation averaged 17.3 percent in 2016 but has since the beginning of this year witnessed rapid decline. The local currency as at last Friday May 5, 2017 had appreciated by about 1.62 per cent against the US dollar while money supply improves.

BMI, the research arm of ratings agency Fitch is predicting Ghana’s inflation to average 13.0 percent by end of this year.

It is important to note however that BMI’s prediction is higher than government’s own projection of 12.4 per cent average inflation rate for end-year 2017.

BMI expects inflation to ease further in April 2017 due to relative stability in the Ghanaian economy.

“We anticipate the trend of gradual cooling will continue. In March, inflation came in at 12.8 percent year-on-year, already down from 13.3 percent in January and we expect that a similar decline in April 2017,” it explained.

According to Dr Eric Osei-Assibey, Economist and Lecturer with the University of Ghana, “looking at the commitment of government not to overspend and being complemented by the tightening of monetary policy, we are sure they would be able to anchor inflation pressures for the year.”

Inflation, he explained emanates largely from the demand side so given that “we are able to deal with the supply side with the coming on board of government’s planting for food initiative which will increase the food basket, we can reduce food inflation drastically.”

Dr Osei-Assibey was of the view that if Ghana could get its programme with the International Monetary Fund (IMF) going, so the Fund would release money, it would shore up the country’s international reserves which would also ensure the sustainability of the exchange rate.

“If we are able to keep the exchange rate stable as we have done then we are likely to achieve the inflation target; in effect if we don’t have inflation skyrocketing as we used to have it, then peoples’ purchasing power would increase so they can buy more goods and services which then would improve the cost of living and standard of living,” he concluded.

Economist, Leslie Mensah attributes the declining inflation to the absence of the usual hikes in utility tariffs as happened last year, a relatively stable exchange rate and the new government’s business-friendly posturing which have found expression in the removal and reduction of some taxes and levies.

“The effects of the utility tariff increments after the removal of subsidies have began to die down having crossed the one year cycle; the imported component of inflation has taken a dip too; petrol would have been more expensive today if the VAT on petrol had not been reduced to 15 per cent and if the excise tax were still place so these have largely accounted for the low inflationary pressures we are seeing which is a good sign,” Mr Mensah explained.

According to him, if the end year showed a much lower figure than what it was at the beginning of the year then government would have succeeded in bringing down inflation.

This means the end of the year, people would face lower price increases then the beginning of the year.
Mr Mensah observed that “for now Ghanaians would continue to experience relatively high inflation for some few months before it eases.

He described the 13 per cent average inflation rate as still high since “even public sector unions did not get that much increase in wages.”

“For the past four years, public sector workers have received lower wage increases than the average rate of inflation so year after year they have been made worse off,” he observed.

Source: The Finder

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