Ghana’s economy remains strong- BoG

Ghana’s economy has remained generally strong despite a weak global economy, according to the Central Bank’s survey.

Challenges emanating from both domestic conditions regarding the shortfall in energy supply and slowdown in the production of major exports (cocoa and gold) have moderated the pace of economy activity somewhat.

The manufacturing sector related activities achieved significant annual growth of 31.9 percent in the third quarter. Transport sector activities also grew by 21.6 percent on year-on-year basis. Consumer demand – proxied by retail sales, also went up by 14 percent over the second quarter.

The September update of the CIEA showed that the pace of growth moderated in year-on-year terms to 5.4 percent compared with 7.7 percent in June, and 21.7 percent recorded a year earlier. The seasonally adjusted real Composite Index of Economic Activities (CIEA) recorded an annual growth of 7.3 percent compared with 20.1 percent in the previous year, suggesting a possibly higher potential for growth.

According to the Central Bank, the major contributory components to the slowdown in growth were cement sales, SSNIT contribution and exports. However, these were mitigated by growth in private sector credit, industrial electricity consumption and port activities. Quarterly developments in the index depict a growth of 2.2 percent in the third quarter of 2012 compared with a contraction of 2.1 percent in the second quarter of 2012.

The mood of the private business sector captured in the third quarter business confidence index remained relatively depressed. The Business Confidence Survey conducted in September 2012 suggests that the Overall Business Confidence index dropped to 94.3 percent from 95.1 percent in June 2012. In general, firms were less optimistic about both the prospects of their operations and the realization of their expectations, industry prospects and developments in lending rates. However, they were hopeful about developments in exchange rate, price trends and prospect for growth.

Also, there were some notable developments which were captured in the survey. Particularly, adverse developments in the exchange rate which influenced business sentiments in the previous two surveys had eased and therefore moderated the downward trend in the index. Businesses that pointed to movements in the exchange rates as somewhat moderate or very moderate increased to 25.9 percent in September 2012, from percent in June 2012.

The overall Consumer Confidence Index improved to 101.1 in October from 96.5 in July 2012. Consumers were optimistic about general economic conditions which were expected to positively impact on household’s financial conditions. This was reinforced by improved sentiments about both current and future consumer price developments. However, consumers expressed concerns about job prospects in the immediate future.

The pace of growth in the CIEA has slowed in two consecutive quarters of the year on the back of base effects from addition of the oil sector to the economy in 2011 and other challenges such as shortfall in energy supply and lower export receipts. The confidence survey results point to improved sentiments by businesses and consumers on the inflation and exchange rate expectations, and the broader economic outlook. Looking ahead, economic growth prospects could be boosted by the subdued inflation profile, continued expansion in private sector credit and improved business and consumer sentiments.