Researchers at Standard Bank, parent company of Stanbic Bank Ghana, have predicted growth to remain stable in 2018 and 2019 in the face of strong oil sector growth coupled with above-average growth in the industrial non-oil economy, and progress in public finance management.
This was contained in the Standard Bank’s African Markets Reveal report for the month of May, 2018.
According to the report, “We expect growth at a brisk 7.0% year-on-year in both 2018 and 2019, due mainly to strong oil-sector growth. The industrial non-oil economy is also set to deliver above-average growth over the next three years due to structural reform in the financial and power sectors. Furthermore, steady progress in public finance management should improve tax revenue collection, which should enable increased infrastructure spending”.
The report however indicates that private sector credit growth declined in the period under review because of the defensive posture taken by banks in the wake of a new minimum capital requirement by the Bank of Ghana. The report said:
“Private sector credit growth (PSC) reached only 13.8% year-on-year in February from 17.5% year-on-year twelve months prior. Changes to capital requirements in the banking sector may have forced commercial banks to adopt a defensive posture toward credit extension. The Bank of Ghana has mandated all banks to increase the minimum capital requirement to GH¢400million by year-end from GH¢120million currently.”
The report further indicates that for the banking sector to remain fully compliant with the new minimum capital requirement, the sector needs a capital injection of between US$800million and US$1billion. According to the report:
“We estimate that the entire sector needs a capital injection of US$800million to US$1.0billion to become fully compliant. There is a strong possibility that this new requirement will trigger consolidation in the sector. Once the new requirements have been complied with, we expect credit growth to rise meaningfully – thus potentially boosting economic growth. The changes to minimum capital for banks should also result in most banks being able to provide more liquidity due to larger net open positions (NOP).”
The African Markets Reveal is a monthly report issued by the Standard Bank Group, parent company of Stanbic Bank Ghana, and focuses on the economic and financial outlook of African countries. The report also reviews current economic situations and makes short- to medium-term predictions about the economies of African countries.