Like many other countries, Ghana has not been spared from the observable economic fallout of the Covid-19 pandemic; businesses have generally struggled in maintaining optimum revenue levels, households’ purchasing power have been affected; major sectors of the economy have been hit; the economy has experienced sluggish growth within this period.
However, the Bank of Ghana’s real composite index of economic activity (CIEA) has shown trends of improvement in recent months. The current composite index of economic activity as at September 2020, shows that economic activity recorded an annual growth of 10.5 percent in comparison with that of 2019 which recorded an annual growth of 4.2 percent.
Based on the recent Monetary Policy Committee round, the main drivers of this very impressive improvement in economic activity include construction, credit to the private sector and improvements in business and consumer confidence.
These key areas that have fared well throughout the partial lockdown period, do continue to lead in further improvements in activities post-lockdown.
On a year-on-year basis, real composite index of economic activity grew significantly by 10.5 percent, after recovering in July 2020 from the impact of the COVID-19 pandemic. Economic activity contracted by 1.9 percent and experienced worst decline in March, April and May by 10.2 percent.
Thus, a return to normal business or economic activities may be underway as long as the spread of the pandemic is controlled and businesses and consumers scale up the opportunities presented by the pandemic.
Performance of the components of economic activity
Domestic consumption, proxied by retail sales and domestic VAT collections improved significantly in September, being the highest in the period under review.
Considering the performance of the two components; Retail sales saw a jump in volumes in March 2020 by about GHS480 million, albeit, it fell sharply during the same month of March immediately the lockdown went into force.
Due to the parallel relationship between the two, VAT collection also behaved similarly, experiencing a hike in collections of about GHS500 million in March and also fell sharply afterwards.
The decline in VAT collection continued in May before picking up in June 2020 at GHS430 million. Retail sales picked up slowly in May 2020 to about GHS 490 million in September 2020.
Furthermore, construction activities, proxied by cement sales, also increased in September 2020. However, construction activities largely declined during the lockdown periods of March and April. In May, cement sales picked up immediately in volume of sales and peaked in June. However, its growth was slowly paced in July through to August and September.
According to the BoG’s data, commercial banks’ credit to the private sector during the partial lockdown period maintained fairly positive growth more than in 2019. However, in July 2020, it declined slightly and picked up afterwards to a current level of more than GHS40 billion in volume of credit.
From the onset of the pandemic in March, consumer confidence sharply declined. This is in part due to the fear faced by economic agents in contracting the virus and individuals being cognizant of the spate of death occurring in other parts of the world.
This notwithstanding, consumers’ confidence began improving in April until October 2020, when it remained flat with an index of 101.9. This is largely driven by current and future expectations.
Other indicators that have seen declines in overall activities include imports and exports, business confidence, job adverts, number of private sector contributions to SSNIT, port activity, tourist travels and industrial consumption of electricity.