Economist Dr Lord Mensah is warning that government may end the year missing out on its end of the year single digit inflation target. 

This he says is because the governments’ changes in VAT and inventory refill will make it impossible for the target to be met.

Government is looking at hitting 8.9 per cent inflation target by the close of this year and 8 per cent +/-2 in the next three years.
However recent developments in the economy have raised issues with this target being achieved.

Speaking to JoyBusiness, Dr Lord Mensah, said the changes in VAT formula can be one of the major reasons likely to cause the upsurge in inflation.

“I can see that happen because there are so many factors that will drive inflation upwards which will not allow the government to meet its target at the close of the year. The tax conversion that we saw in the budget and the other being the stocking of inventory by the traders,” he said.

Figures from the Statistical Service put the June inflation at 10 per cent after going up marginally from the month of May by 0.2 per cent from the 9.8% recorded.

Food and Non-alcoholic beverages group recorded a year-on-year inflation rate of 7.3 per cent. This is 0.3 percentage point lower than the rate recorded in May 2018, with the non-food group recording a year-on-year inflation rate of 11.2% in June 2018, compared to the 10.9 per cent recorded for May 2018.

“Therefore importers and traders bringing in goods with demand also being high will affect inflation which is likely to impact on the government’s ability to meet its inflation target,” Dr Lord Mensah added.

Presenting the mid-year budget review statement to parliament, the Finance Minister Ken Ofori-Atta said “Mr Speaker, headline inflation declined from 15.4 per cent in December 2016 to 11.8 per cent in December 2017.

This was supported by appreciable fiscal consolidation, the monetary policy tightening over the past years, the relative stability of the exchange rate for most of 2017, as well as the easing of underlying inflation pressures.”

Mr Ofori-Atta added, “The slowdown in inflation was driven by both food and non-food inflation. Food inflation declined to 8.0 per cent in December 2017, from 9.7 per cent in December 2016, driven largely by domestic food components.

Similarly, non-food inflation declined from 18.2 per cent in December 2016 to 13.6 per cent in December 2017, supported by the relative stability in the domestic currency and favourable base effects.”