Inflation uptick forecasted to peak at 26% in March

GCB Capital has maintained its stance on the 2024 inflation outlook, unfazed by the unexpected inflationary uptick witnessed in January as the suspension of the proposed Value-Added Tax (VAT) on household electricity consumption is identified by the firm as a mitigating factor, alleviating immediate inflationary concerns.

Nevertheless, GCB Capital anticipates a potential ascent in inflation to approximately 26% in March 2024, primarily attributed to unfavorable base drift. The firm underscores the likelihood of a return to a disinflationary trajectory from April 2024, with a projection of headline inflation dipping below the 20% threshold by May.

The end-of-year outlook is cautiously set at 16.5% ±1%, contingent on various factors remaining constant. GCB Capital acknowledges, however, the looming risks emanating from the persistent Cedi depreciation, despite the Foreign Exchange (FX) liquidity cushion stemming from ongoing disbursements under the International Monetary Fund (IMF) program. The potential pass-through effects of currency depreciation and its subsequent impact on inflation are emphasized in the coming months.

Additionally, the firm highlights concerns regarding potential inflationary pressures stemming from unbridled expenditure in the lead-up to 2024 elections. GCB Capital underscores the risk of a resurgence in demand-driven price pressures, particularly during the peak of the political season.

Source:norvanreports