The Bank of Ghana is projecting the economy to grow between 2.0 to 2.5 percent, up from its earlier projection of 0.9 percent.
This follows the gradual recovery of the economy in the third quarter of the year after the easing of some of the COVID-19 restrictions.
Addressing the media after the 96th Monetary Policy Committee (MPC) meeting, the Governor of the Bank of Ghana, Dr. Ernest Adisson, said the Ghanaian economy has begun to experience some recovery as price pressures that resulted from the pandemic-related restrictions and lockdown measures in March 2020, were easing.
He said headline inflation, after edging up sharply to 11.4 percent in July 2020, had also started going down, now at 10.5 percent in August, on the back of declining food prices.
He noted that, although as expected, the latest data released by the Ghana Statistical Service (GSS) confirms the full impact of the pandemic on economic activity in the second quarter of 2020, high frequency data available to the central bank showed some green shoots of rebound in economic activity.
Consumer confidence
The Governor noted that surveys conducted by the central bank in August indicated that consumer confidence was bouncing back strongly and was currently above pre-lockdown levels.
“Consumers seem to be responding to the gradual lifting of restrictions—providing some scope for meaningful economic activities.
“Business confidence also increased, but yet to reach pre-lockdown levels. About 95 percent of businesses surveyed showed strong optimism, reflecting the improving macroeconomic conditions, stability in the exchange rate, lower input prices, moderation in lending rates, and positive industry prospects,” he stated.
Real CIEA grows by 3.6%
He said the real Composite Index of Economic Activity (CIEA) grew by 3.6 percent in July 2020, compared to a contraction of 10.6 percent recorded in May.
“Consumer spending, industrial consumption of electricity, and construction activities have all reached pre-lockdown levels, while tourist arrivals and port harbour activity are gradually edging upwards.
“In contrast, imports, exports, and private sector contributions to social security remain below pre-lockdown levels. In addition to the positive trends in the CIEA, other indicators monitored by the Bank of Ghana also point to signs of a recovery. With the exception of workplace clusters, which still remained below baseline, all other indicators embodied in the google mobility data —commuting and travelling, visit to supermarkets and pharmacy, and residential activity have moved above baseline,” he explained.
Banking sector
BOG further indicated that, “the banking sector remains liquid, well capitalized, and well-positioned to support growth. The sector remains robust as reflected by the strong Financial Soundness Indicators and the Banking Sector Stability Index. Banks are well capitalized to contain short-term liquidity pressures and any possible worsening of the economic environment.
“The NPL ratio has declined marginally and profitability remains strong. The recent survey results revealed that while the pandemic has increased the industry’s cost of operations, banks have not passed on the associated costs to consumers through higher interest margins”.
Furthermore, the MPC release stated that “the downward adjustment of the monetary policy rate impacted the weighted average interbank lending rate, which declined to 13.6 percent in August 2020 from 15.2 percent in August 2019. Average lending rates of banks have steadily declined to 21.4 percent from 24.0 percent over the same comparative period.
The recovery, the BOG stated, “has been underpinned by coordinated large fiscal stimulus packages, supportive monetary policies and widespread easing of restrictions, especially in countries that have made significant progress in containing the spread of the virus. The recovery is expected to continue, but at a gradual pace”.
The BOG however, expressed worry of a possible resurgence of a second wave of the pandemic which is generating uncertainties and posing risks to the anticipated recovery.
