For a fourth consecutive survey this year, the central bank’s measure of the sentiments of business owners in the country has shown a dwindling of confidence – citing economic challenges which have increased cost of production, created raw material shortages, weak consumer demand, among others, as reasons.
Per the September 2021 summary of economic and financial data, the latest business confidence survey, conducted in August 2021, depicts that optimism of businesses has consistently declined from a baseline level of 100 percent to 93.2 from 97.9; 96.9 and 96.3 recorded in February, April, and June 2021 respectively.
“The survey results revealed the inability of businesses to meet their short-term company targets, driven by high input costs, unavailability of raw materials, weak consumer demand and rising labour costs,” Dr. Ernest Addison, Governor of the Bank of Ghana (BoG), disclosed at the 102nd press briefing of the MPC last week.
The Bank of Ghana’s latest survey, which indicated some softening of business sentiments, is consistent with the Ghana Purchasing Managers Index conducted in August 2021, which fell mainly on the back of rising input costs.
The Ghana Purchasing Managers Index is a composite index based on responses in five sub-components: namely new orders, output, employment, suppliers’ delivery times, and stock of items purchased from about 400 private sector companies across agriculture; construction, industry, services and wholesale and retail sectors.
Consumer confidence on the other hand improved, reflecting optimism about current and future economic conditions.
The BoG’s update of Composite Index of Economic Activity (CIEA) for July 2021 reflected continued recovery in domestic economic activity. The real CIEA recorded a 20.0 percent year-on-year growth in July 2021, compared with 20.2 percent in June 2021 and 3.9 percent growth in July 2020.
The growth in the indicators was somewhat broad-based, with port activity, imports, domestic VAT and air-passenger arrivals accounting for the increase, according to the Bank of Ghana.
Private sector credit
Since the outbreak of coronavirus pandemic, private sector credit growth has not fully recovered to pre-pandemic levels due to lingering supply-side [banks] risk aversion from shocks of the pandemic as well as slower-than-expected growth in demand for loans that are backed by bankable projects.
Nonetheless, commercial banks have signalled a desire to ease their stance on credit to the private sector, according to the central bank’s own survey. This, the central bank said, is expected to translate into higher credit growth to support the ongoing recovery process, as in the coming months there is a potential of increased demand for credit.