Fitch Solutions, a UK-based firm, has forecasted that Ghana's inflation will increase from an annual average of 4.7% in 2026 to 11.3% in 2027. This upward trend is attributed to fading exchange rate support, modest fiscal loosening, and strong money supply growth. The firm's prediction is based on various economic indicators, including the broad money supply growth, which has already exceeded nominal Gross Domestic Product (GDP) growth by 17.1 percentage points in quarter two of 2026.
The strong El Niño event, which is expected to peak towards the end of 2026, has already begun lifting global food prices and will likely add to imported inflationary pressures in Ghana during 2027. Fitch Solutions also noted that a further escalation of tensions in the Middle East could push energy prices higher, keeping fuel costs elevated in Ghana and adding to inflation. This could prompt the Bank of Ghana to tighten monetary policy as early as November 2026 or deliver more than the 200 basis points of hikes currently forecast.
According to Fitch Solutions, as inflation accelerates and breaches the 10% mark in quarter two of 2027, the Bank of Ghana is expected to begin tightening, raising the policy rate by a cumulative 200 basis points by year-end. The firm also forecasts that the current account surplus will narrow from 7.9% of GDP in 2026 to 5.3% in 2027, reflecting a modest decline in gold prices and a 9.1% decline in cocoa production due to El Niño-related weather disruptions.
The decline in cocoa production and gold prices will likely impact Ghana's economy, as these are significant contributors to the country's GDP. Fitch Solutions also noted that the Bank of Ghana's goal of achieving 15 months of import cover by 2028 is highly ambitious and unlikely to be reached. To support portfolio investment inflows, policymakers will likely seek to maintain a positive real interest rate.
Fitch Solutions' forecast is based on various economic indicators, including the impact of the El Niño event on global food prices and Ghana's economy. The firm's prediction of an upward inflation trend is also driven by the expected strong money supply growth and modest fiscal loosening. The Bank of Ghana's monetary policy decisions will likely play a crucial role in shaping the country's economic outlook.
The predicted increase in inflation will likely have implications for Ghana's economy, including the potential for higher interest rates and a decline in the purchasing power of consumers. Fitch Solutions' forecast highlights the need for careful economic management to mitigate the impact of external factors, such as the El Niño event and global economic trends.
Overall, Fitch Solutions' prediction of an 11.3% inflation rate in 2027 highlights the need for vigilant economic management and careful consideration of monetary policy decisions. The forecast also underscores the importance of diversifying Ghana's economy and reducing its reliance on a few key commodities, such as gold and cocoa.
Key points
- Fitch Solutions predicts Ghana's inflation will rise to 11.3% in 2027.
- The strong El Niño event will likely add to imported inflationary pressures in Ghana during 2027.
- The Bank of Ghana is expected to begin tightening monetary policy, raising the policy rate by a cumulative 200 basis points by year-end.
