Governor of the Bank of Ghana, Dr. Ernest Addison addressed the 96th Monetary Policy Committee (MPC) press briefing on Monday and observed that the economy is showing emerging signs of recovery, following the sharp global economic contraction in the first half of 2020 due to the COVID-19 pandemic.
He expressed optimism that the recovery is expected to continue, but at a gradual pace.
However, Dr. Addison cautioned that a key downside risk is the resurgence of a second wave of the pandemic which is generating uncertainties, and posing risks to the anticipated recovery.
A few of the key points the Governor enumerated include the fact that headline inflation, after edging up sharply to 11.4 percent in July 2020, has started going down, now at 10.5 percent in August, on the back of declining food prices.
Additionally, food inflation has steadily declined from 15.1 percent in May to 11.4 percent in August, partly reflecting seasonal effects. Non-food inflation has however, increased from 8.4 percent to 9.9 percent over the review period.
“On fiscal policy, provisional data on budget execution for the first seven months, showed an overall budget deficit of 7.4 percent of GDP, against the revised target of 7.2 percent of GDP as the COVID-19 pandemic continued to impact fiscal operations”.
The BoG Governor also noted that recovery and improving sentiments on global financial markets should help ease pressure on emerging market currencies. In sum, the drivers of economic growth are returning to normal with prospects for a good recovery, he posited.
Despite inflation trending downwards, the Monetary Policy Committee (MPC) of the Bank of Ghana maintained the monetary policy rate at 14.5 percent, citing widening fiscal policy as the main concern.
Countries across Europe are seeing a resurgence in COVID-19 cases after successfully slowing outbreaks early in the year. Downside risk to growth in emerging markets is also increasing, due to the rising threat of a second wave of COVID-19 infections in several developed economies.
This is something we have to guard against in Ghana as the economy slowly recovers. We need to observe the health protocols until the virus is completely eradicated. Already, complacency is setting in as more and more people continue to avoid nose/face masks, while social distancing is being ignored.
Owing to the threat of a likely second wave as anticipated, we must not let our guard down now.
Local economies tracker reveals governance gaps
The Local Economies Tracker conducted by the Ghana Statistical Service (GSS), in collaboration with the United Nations Development Programme (UNDP), in 2,770 communities/localities in all the sixteen regions of Ghana found that the COVID-19 pandemic has had both economic and social effects on local communities, resulting in an increase in crime, domestic violence, prices, and low business productivity.
However, assistance from non-state actors such as churches and philanthropists provided significant support in complementing Government’s efforts to lessen the impact of the pandemic on communities.
Deputy Resident Representative of UNDP in Ghana, Silke Hollander noted that: “Support received by the communities from churches and philanthropists is a clear demonstration of how non-state actors have and continue to complement government’s efforts to ensure communities recover better from the pandemic. Partnerships like these are key for the achievement of the SDGs”.
The survey results revealed that localities witnessed an increase in crime during the country’s COVID-19 lock down period, with about three out of ten communities (34.1%) experiencing a rise in crime, such as theft and burglary.
This was followed by an increase in domestic violence (3.7%) and assaults (3.1%) in communities. In addition, the COVID-19 restrictions also affected businesses in the local communities, with seven to eight out of ten businesses experiencing reduction in production (71.7%) and sales (89.7%) respectively.
The businesses also witnessed a reduction in labor supply (36.0%), and prices of goods and cost of credit increased.
Despite district assemblies being the frontline development helpdesk during the outbreak of pandemics like COVID-19, only few respondents indicated that their district assemblies created alternative markets, provided subsidized inputs, and gave soft loans to businesses and farmers.
This demonstrates that our decentralization experiment is still in its infancy since power has not effectively devolved to the grassroots as expected to take the weight of governance off the back of central government.
Local government structures are not resourced enough to undertake such expected local development when District Assembly Common Fund operations are funded with 7.5% of government total tax revenue quarterly.
However, most localities have structures such as district standing, community development and business assistance committees, to help them recover from future shocks. Also, the findings show that close to 25% and 78% of localities did not benefit from the subsidies on electricity and water respectively.
This is because these localities are not connected to the national grid, and for water, because they rely on other alternative sources of water and are not served by the Ghana Water Company Limited.
