Bank of Ghana says economy showing signs of rebound

Despite Ghana’s economy shrinking by 3.2 percent in the second quarter of the year, the central bank says the economy is on a recovery path as its measure of economic activity shows positive signs.

“High frequency data available to the Bank of Ghana show some green shoots of rebound in economic activity. From the Bank of Ghana’s surveys in August, consumer confidence is bouncing back strongly and is currently above pre-lockdown levels,” the Governor of the Bank of Ghana, Dr. Ernest Addison, said after the Monetary Policy Committee (MPC) had met to review the health of the economy.

Dr. Addison told journalists at the MPC press briefing earlier this week that consumers are beginning to respond positively to the easing of COVID-19 restrictions by government.

“Consumers seem to be responding to the gradual lifting of restrictions—providing some scope for meaningful economic activities. Business confidence also increased but is yet to reach pre-lockdown levels. About 95 percent of businesses surveyed showed strong optimism, reflecting the improving macroeconomic conditions, stability in the exchange rate, lower input prices, moderation in lending rates, and positive industry prospects,” the Governor said.

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

The survey revealed that consumer spending, industrial consumption of electricity, and construction activities have all reached pre-lockdown levels, while tourist arrivals and port harbour activity are gradually edging upwards.

Notwithstanding the gradual change in fortunes, the BoG’s survey showed that imports, exports, and private sector contributions to social security remain below pre-lockdown levels.

Government is betting on the rebound to push the economy above the 0.9 percent GDP growth target for this year. If growth comes in higher, that could also translate into an improvement in government revenue relative to the current low forecast, providing more resources to help address the impact of the pandemic.

Achievable target

The Economics Research wing of Goldman Sachs, a global financial institution, in a recent update to investors said Ghana’s economy will perform better than government’s 0.9 percent GDP growth projection for this year.

Goldman Sachs said it sees Ghana’s pandemic-hit economy growing at a rate of 1.2 percent, following a stronger-than-anticipated performance from some key sectors of the economy in the second quarter.