Ghanaian consumers continue to experience high prices for goods, even as the national inflation rate declines. This apparent contradiction arises because lower inflation signifies that prices are increasing at a slower pace, not that they are actually falling.
Data and policy analyst Alfred Appiah illustrates this economic reality. A food item priced at GHS 100 in 2021, for example, could have risen to GHS 134 in 2022 and GHS 198 in 2023. By August 2026, its price could reach approximately GHS 298. This shows that while the speed of price increases has slowed, the absolute price level remains significantly higher than in previous years.
This situation fits into Ghana's broader economic narrative of managing inflationary pressures. The country has seen efforts to bring down soaring inflation rates from recent highs. However, the cumulative effect of past high inflation means that the general price level has already climbed substantially. Consumers compare today's prices to what they used to pay, which explains their frustration despite official reports of falling inflation.
Alfred Appiah explains this concept clearly: "Think of inflation as the speed at which prices are moving, rather than the prices themselves." He adds that if a car slows from 100 kilometres per hour to 40 kilometres per hour, it is still moving forward. Similarly, prices continue to rise, just more slowly, a phenomenon economists call disinflation.
The implications for Ghanaian households are significant. While disinflation prevents prices from rising even further away from people's incomes, it does not make goods cheaper. For prices to actually fall, Ghana would need deflation, a sustained decline in the general price level. However, deflation is not always desirable, as it can discourage spending and investment, potentially weakening businesses and increasing unemployment. The focus for policymakers and citizens should be on achieving low and stable inflation, coupled with rising incomes and productivity. This approach would allow household purchasing power to improve over time, addressing the genuine concerns of consumers feeling the pinch of high prices.
Food inflation, for instance, averaged 47.8% in 2023. Had this rate continued, the GHS 100 item could have cost GHS 540. Instead, with a 24.5% average food inflation rate in 2024, the item costs GHS 298. This demonstrates the benefit of lower inflation in preventing even more extreme price hikes. However, the current price level still represents a substantial increase from just a few years ago. Therefore, the public's complaints about expensive goods and the government's narrative of falling inflation can both be true. The challenge remains for incomes and wages to grow fast enough to match these new price realities.