A global rating agency, Fitch Solutions, expects Ghana’s Central Bank, the Bank of Ghana, to maintain its policy rate, the rate at which the Bank lends to commercial banks, at 13.5% for the rest of the year to cushion the country’s economic recovery process.
According to Fitch, maintaining the policy rate at 13.5% will be of tremendous benefit to the country as it will help stimulate economic activity because the rating agency expects West Africa’s second largest economy to be among the fastest growing economies in 2021 within the Sub-Saharan African region.
“Our view now is that we expect the Central Bank to hold the benchmark interest rate at its current level- 13.5% until the end of the year. This is to enable the economic recovery to gain momentum in the coming months”.
Also, Fitch expects Ghana’s economy to grow at 4.5% in 2021, a 0.5 percentage point lower than the Central Bank’s forecast of 5% this year. The Rating Agency cited the recent vaccination exercise as key in the country’s recovery process this year. Meanwhile, this projection by Fitch is an affirmation of an earlier forecast by the World Bank which also pegs the country’s growth rate at 4.5% this year.
“…We expect Ghana’s economy to be among the strongest economies in sub-Sahara Africa this year, growing around 4.5%. We think vaccines rollout in the coming months will help check COVID-19 infections”.
Strong second quarter growth
Fitch Solutions further stated that Ghana’s economy recovered strongly during the second quarter of this year and is expected to continue for the remaining quarters despite the presence of COVID-19. The research arm of the rating agency of Fitch indicated that its data suggests that the economy is on a strong rebound, consistent with the Bank of Ghana’s Composite Index of Economic Activity as well as Business and Consumer Confidence Survey.
On the contrary, Fitch indicated that unlike Ghana where economic activity is gaining momentum, the situation looks gloomy for Africa’s most industrialized nation, South Africa.
“High frequency data suggests strong recoveries in Kenya, Uganda and Ghana, while weak Q12021 Gross Domestic Product readings for South Africa and Mozambique point to a muted outlook for Southern Africa. Although Ghanaian GDP data have not yet been published at the time of writing, PMI readings and the Central Bank’s composite indicator of economic activity both indicate robust growth in economic activity in the first months of 2021”.
Growth in Q1 2021
Meanwhile, data from the Ghana Statistical Service (GSS) show that the economy expanded by 3.1% in the first quarter of this year, driven mainly by Construction, Manufacturing as well as Information and Communication sub sectors. But it was lower than what was realized the same period in 2019.
Despite the COVID-19, Ghana’s economy has shown some resistance even though it recorded a sluggish 0.4% growth in 2020. This was as a result of two successive contractions in the second and third quarters of 2020 by 3.2% and 1.1% respectively. In 2021, all major rating agencies and institutions have forecast a strong growth for the Ghanaian economy anchored heavily on the roll out of vaccines.
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