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December 2022 SSA Inflation Update - Easing oil price tames inflation in Africa

SSA Inflation Update– December 2022
Easing oil price tames inflation in Africa
For the first time since the invasion of Ukraine, inflation fell in 7 out of the top 10 economies in Africa. The largest declines were observed in Angola (-1.4ppts), Ethiopia (-1.3ppts) and Ivory Coast (-0.6ppt). On the flip side, inflation surged in Ghana (+3.8ppts) and Egypt (+2.6ppts) on the back of currency depreciation.
Inflation soars above 50% in Ghana In December 2022, headline inflation rose to 54.1% y/y, barely 9ppts lower than Ghana’s highest inflation outcome on record (Mar 2001: 63.1%). Inflation in Ghana remains elevated amid portfolio flow reversals and weaker exchange rate. Inflation averaged 31.5% y/y in 2022 (2021: 10.0%). To combat inflation, the benchmark interest rate was raised further by 250bps to 27.0% in November, bringing the cumulative hikes in 2022 to 1,250bps.
Real rate of return improves in South Africa as inflation eases Inflation decelerated for the second month in a row in South Africa. Despite falling slightly to 7.2% y/y in December, inflation remained above the annual average of 6.8% y/y (2021: 4.5% y/y). The softening inflation outcome can be attributed to easing transport and food prices. As a result of the dip, the South African Reserve Bank (SARB) decided to raise rates at a slower pace (25bps) to 7.25%, hereby narrowing the negative real rate of return to 0.05%.