New data from the Bank of Ghana (BoG) have revealed that despite the pandemic generally slowing down momentum of the economy, coupled with the upcoming general election, businesses remain confident about economic prospects as indicators show activities have picked up months after COVID-19-related restrictions were eased.
The Bank’s Composite Index of Economic Activity (CIEA) shot up to 10.5 percent in September – even better than the same period last year when it recorded 4.2 percent growth at a time there was no pandemic.
The growth is even more impressive when compared to the lockdown period, which saw the index take a sharp nose-dive to hit -10.5 percent in April. This implies that economic activities are rapidly getting back to normal, even better than the pre-pandemic period.
According to Governor of the central bank, Dr. Ernest Addison at a press meeting on Monday, key drivers of economic activity during the period were construction activities, manufacturing, and credit to the private sector. In addition, the Purchasing Managers Index (PMI) – which gauges the rate of inventory accumulation by managers in the private sector and also captures dynamics in economic activity – has increased significantly.
The CIEA is not the only indicator pointing to a rebounding of economic activities. Both consumer and business confidence indicators are also moving in the same direction. The Bank’s survey shows that consumer confidence in October has shot up above pre-lockdown levels, hitting 101.9 points compared to 84.1 percent in April.
Then, the business confidence – albeit slower than pre-lockdown numbers – also followed the same trajectory as it increased to 94.4 percent in October compared to 77.2 percent recorded in April, largely supported by improved company prospects and steady demand for goods and services.
On the back of these numbers, supported by external conditions, the central bank’s Monetary Policy Committee (MPC) maintains the economy will recover faster than previously anticipated.
“The Committee noted that global GDP growth rebounded in the third quarter of 2020 after the sharp fall in the second quarter, but is expected to slow down in the last quarter as rising COVID-19 cases moderate the recovery process.
“The supportive global monetary policy stance, together with fiscal stimulus packages, is likely to persist over the medium-term to support the growth-recovery process. Consequently, global financing conditions are expected to remain favourable in the near-term.
“On the Ghanaian economy, evidence from high frequency indicators – the CIEA outturn for October 2020, improved consumer and business confidence, and strong liquidity flows – have helped to deliver a faster than expected recovery in economic activity.
“These flows include payments to contractors, Specialised Deposit-Taking Institution (SDI) depositors, clients of the Security and Exchange Commission (SEC) licenced fund managers, micro and small business loans provided by government through the National Board for Small Scale Industries (NBSSI), and the policy and regulatory reliefs to banks and SDIs. Based on these observations, the Bank maintains that growth will perform better than earlier projected,” the MPC report stated.
Finance Minister Ken Ofori-Atta, in his 2021 first-quarter budget presentation, revised the country’s growth target for 2020 to 1.9 percent against a previous target of 0.9 percent projected in the mid-year budget – a figure that also corresponds with the International Monetary Fund’s (IMF) growth expectation. The Bank of Ghana has even notched that target higher, as it expects the economy to have grown at 2 to 2.5 percent by end of the year.