Bank of Ghana index points to economic recovery

Business news for Wednesday, September 30, 2020

Source: Goldstreet Business

2020-09-30

Data released by the Bank of Ghana this week suggests that the national economy has entered a recovery phase since July, following the easing of restrictions that inevitably also promoted economic activity.

The central bank’s Composite Index of Economic Activity (CIEA) recorded a recovery in real terms of 3.6 percent for July 2020, compared with a 10.6 percent contraction recorded in May.

According to the Ghana Statistical Service (GSS), Ghana’s economy contracted 3.2 percent in the second quarter of this year, a decline from the 5.7 percent growth recorded during the same period in 2019.

Unlike the growth of the Gross Domestic Product, measured by the Ghana Statistics Service, which tracks the growth of economic value in the economy, the BoG CIEA measures changes in the level of economic activity.

Although the two produce different results in quantitative terms, they are correlated with respect to direction, since it is economic activity that generates economic value. Therefore, the growth of the CIEA announced by the BoG has always been accompanied by the growth of GDP, which is then published by the GSS.

“Consumer spending, industrial electricity consumption and construction activities have reached pre-closure levels, while tourist arrivals and port activities are gradually increasing,” explained Central Bank Governor Dr. Ernest Addison , in a statement after the BoG’s Monetary Policy Committee (MPC) meeting.

However, by contrast, imports, exports, and private sector contributions to social security remain below pre-closure levels.

In addition to the positive trends in the CIEA, other indicators monitored by the Bank of Ghana also point to signs of recovery. With the exception of the workplaces groups, which still remained below the baseline, all other indicators incorporated into Google’s mobility data: commuting and travel, visits to supermarkets and pharmacies, and residential activity have moved above the baseline.

“The Ghana Purchasing Managers Index, which measures the rate of inventory accumulation by managers of private sector companies and measures the dynamics of economic activity, points to a steady increase in business activity since April 2020 “said the governor.

In the real economy, despite the contraction in the second quarter, the indication is a better evolution of growth in the third and fourth quarters. The main indicators of economic activity point to a recovery.

“A sustained level of consumer and business confidence, widespread growth in CIEA indicators support positive growth conditions outlook,” said Dr. Addison.

The Bank expects to estimate that growth in 2020 will be between 2.0 percent and 2.5 percent.

Before the arrival of the coronavirus in Ghana, the country enjoyed a strong streak of economic growth since 2017, of between six and eight percent annually.

Given this, some economic analysts have pointed out that this lays the foundation for a rapid recovery in economic activity, given that the coronavirus is currently under control without further recourse to the necessary draconian measures that seriously slow down economic activity.

The World Bank, the International Monetary Fund and the African Development Bank predict negative economic growth in 2020, both globally and pan-African. In fact, sub-Saharan Africa is expected to enter its first economic recession in 25 years.