GHANA: Headline inflation for August unexpectedly declined to 40.1 percent y/y from 43.1 percent. This is the lowest print in eleven months and the first decline we have seen since April 2023.
We had forecasted an increase to 45.3 percent y/y. The reduction in inflation was broad-based as both food and non-food components slowed faster than we had expected. Food inflation printed at 51.9 percent y/y from 55.0 percent and non-food inflation declined to 30.9 percent from 33.8 percent. On a month-on-month basis, the headline index decelerated by 0.2 percent from a 3.6 percent acceleration in July. Food inflation declined to -0.3 percent m/m from 3.80 percent in July, while non-food inflation declined to -0.20 percent from 3.40 percent. The slowdown in inflation was mainly on the back of a relatively stable cedi. As a result, for the first time in twelve months, inflation on imported items, at 36.2 percent y/y, was tamer than inflation on locally-produced items at 42.4 percent.
Meanwhile, the BoG governor shared in a public address that banking sector data for the first half of 2023 reflected some improved performance, despite declines in some key financial soundness indicators. Recall that in 2022, most banks reported significant mark-to-market valuation losses on their holdings of government bonds as well as losses due to higher impairments on loans and rising operating costs.
The industry posted losses of GHS8.0bn in 2022, compared with a profit of GHS7.4bn recorded in 2021. However, in the first half of 2023, the industry saw a 51.4 percent y/y increase in net income to GHS4.3 billion, despite increases in cost. The prudential data showed portfolio rebalancing from medium- and long-term investments to short-term investments by banks, amid gradual increases in new loans. The governor said that for the rest of the year, the banking sector is expected to remain broadly stable, supported by the regulatory reliefs and sustained growth in profitability.
