Economic outlook for 2022 positive – Addison

Economic outlook for 2022 positive – Addison

…but warns of mounting inflationary pressures

 Despite lingering concerns about the passage and implementation of the 2022 budget, as well as possible disruptions to global supply chains, following the emergence of the omicron variant of COVID-19, Governor of the Bank of Ghana (BoG), Dr. Ernest Addision, has described the economic outlook for the coming year as positive.

“The economic outlook for 2022 is positive although there are some potential risks which should be closely monitored. In particular, the uncertainties surrounding food prices, petroleum price adjustments, and the potential second-round effects of these are likely to exert inflationary pressures in the outlook,” he remarked at the 2021 edition of the Annual Bankers’ Week Dinner, held in his honor by the Chartered Institute of Bankers (CIB).

The monetary policy head highlighted measures that have been undertaken by his outfit to maintain price-stability, including recently raising the policy rate for the first time in over 40 months, by 100 basis points.

He, however, noted that the situation which the country finds itself, with investors seemingly being unconvinced by fiscal sustainability and revenue generation measures in the 2022 budget, has created a significant financing gap and continues to put pressure on the local currency.

Dr. Addison suggested that the economy has reached a point where there is “no room for policy forbearance on all levels,” warning that, anything short of a concerted effort by all stakeholders to meet revenue targets would “unravel the anchor and erode the gains we have made in the last 4 years.”

“The markets assessment of the 2022 budget also suggests lingering doubts about the ability of the revenue measures announced to translate into a large increase in domestic revenue. To add to this, government expenditure is projected to increase significantly in 2022.

As a market access country, we have a huge burden to demonstrate a strong recovery and to ensure that the bold revenue measures introduced yield the required results… This calls for a social contract on fronts with common aspirations across the aisle to make sure we sustain the recovery momentum,” he explained. 

Banking industry

Dr. Addison commended measures undertaken prior to, during the height of the pandemic, and afterward for the resilience of the banking industry.

He noted that these measures are responsible for an industry-wide growth in total assets by 16.1 percent year-on-year to GH¢173.8 billion by the end of October. Total deposits grew also by 17.2 percent on an annual basis to GH¢117.4 billion.

Despite the gradual improvement in gross advances, with an 8.9 percent growth at the end of quarter-three compared with 5.2 percent at the end of quarter-two, the Governor bemoaned the sluggish pace of growth of lending to the private sector.

Noting that, in real terms, private sector credit contracted by 0.8 percent compared with 3.0 percent growth between October this year and the comparable period last year.

He said: “As regulators, we expect that as the growth momentum gains traction, supported by COVID-19 vaccination efforts, private sector credit will rebound.”

Governor Addison said results from the November 2021 stress test showed that the banking sector remains resilient to mild and moderate credit risk and liquidity stress conditions.

“The potential effects of a prolonged pandemic on the banking sector, particularly on asset quality, however, needs to be monitored carefully to inform policy measures,” he added.

Describing the theme for the week-long event: The Digital Economy of Ghana – The Strategic Role of the Banking Industry, as apt, Dr. Addison recalled that digital innovation and transformation have been made more significant during the pandemic.

He stated that for the economy to benefit fully, there is the need to ensure that tech innovations are secure, reliable and guarantee that robust infrastructures are in place to facilitate transformation in the economy.

On her part, President of CIB, Ms. Patricia Sappor urged companies to prioritise the recruitment of associates of the institute, particularly, women, as they have been “specially equipped with the requisite skills to drive growth and performance.”

The first female president of the institute called on more women to aspire to leadership positions and asked for a special focus on SMEs. Ms. Sappor reminded members of CIB of their responsibilities as representatives of the Institute.

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