Even though recent developments in the Ghanaian economy point to a strong rebound of economic activity in the first six months of the year, the confidence of consumers has once again reduced between April and June this year. Recent confidence surveys conducted by the Bank of Ghana show that the consumer confidence index declined to 88.8 in June from 93.2 in April.
Worryingly, after a rise in confidence in the last quarter of 2020 which saw the index rise from 101.9 in October to 102.8 in December 2020, confidence of consumers continues its downward trajectory in the first half of this year. Meanwhile compared to last year, consumer confidence declined by 1.7% this year as the index for June 2020 was 90.3. Providing an explanation to this, the Bank of Ghana attributed the gradual loss of confidence in the economy by consumers to the newly introduced taxes in the 2021 Budget.
“Consumer sentiments softened on the back of a variety of factors including the implementation of the recently announced revenue measures contained in the 2021 Budget”.
Mixed sentiments from confidence surveys
Overall, the Bank of Ghana highlighted that its latest confidence surveys reflected mixed sentiments because unlike consumers, businesses are still hopeful that their activities will improve in the course of the year. Business confidence remains a little bit stable this year, even though the index declined marginally from 96.9 in April 2021 to 96.3 in June. However, a year-on-year analyses show that business confidence has gone up by 9.4% in June 2021, up from a value of 88.0 recorded in June 2020.
The Bank of Ghana in the just ended Monetary Policy Committee meetings indicated that “business sentiments remained somewhat broadly unchanged due to expectations of improvement in company growth prospects”.
Despite the mix sentiments, the BoG is optimistic that recent developments regarding the recovery in global growth conditions, tightening of global financing conditions, and rising global inflation trends are likely to work together and exert some spill over impulses on the Ghanaian economy. This is expected to further consolidate the positive growth recorded in Q4 2020 and Q1 2021, should they work in favor of the domestic economy.
Anticipated Strong growth in Q2 2021
According to figures from the Ghana Statistical Service, Ghana’s economy expanded by 3.1 percent in the first quarter of 2021. The BoG described this growth as “yet another sign of strong recovery from the impact of the pandemic, even though still lower than the pre-pandemic growth of 7.0 percent recorded for the first quarter of 2020”.
Moreover, the central Bank noted that beyond the first quarter GDP outturn, high frequency economic indicators for the second quarter of the year point to a sharp pickup in economic activity relative to last year. The Bank’s updated Composite Index of Economic Activity (CIEA) recorded a strong annual growth of 33.1 percent in May 2021, relative to the contraction of 10.2 percent recorded in the corresponding period of 2020.
The sharp increase in the CIEA, the Bank said, broadly reflects some base-drift effects as well as improvement in industrial production activities, domestic consumption, pick up in import activities, steady rise in construction activities as well as a rise in air-passenger arrivals during the period.
Also, the BoG noted that the Ghana Purchasing Managers Index, which gauges the rate of inventory accumulation by managers of private sector firms and measures dynamics in economic activity, pointed to some sustained levels of business activity in June 2021. consumer confidence consumer confidence
READ ALSO: BoG calls for greater efficiency in debt management
