Coronavirus: Second wave could hamper the economy's recovery process – BoG

"Growth in Ghana’s economy has picked up since the sharp contraction in the second quarter”, these were the words of Bank of Ghana Governor Ernest Addison.

Reacting to the upsurge in coronavirus cases in the country, Mr. Addison said the second wave of the pandemic could completely cripple the economy.

“All the high-frequency indicators of economic activity have rebounded, consumer and business confidence levels are back at pre-lockdown levels, and there are indications of steady growth in private sector credit. However, the renewed threat from the second-wave of the pandemic has again heightened uncertainty and could hamper the recovery process in the near-term”, he said at a Monetary Policy Committee meeting on Monday, 1 February 2021.

He said the global resurgence of COVID-19 infections has elevated uncertainties in the outlook for this year, posing “significant risks to the pace of recovery in the near-term.”

Global growth prospects, he noted, remains positive although it is conditioned on a successful vaccine rollout.

“When well-coordinated, these will help support the much-anticipated global growth rebound in the second half of 2021”, adding: “These conditions will also foster accommodative near-term monetary policies in Advanced Economies, and trigger a search for yield in Emerging Market and Developing Economies with strong fundamentals.”

Dr Addison also said rising debt vulnerabilities in emerging market and frontier economies, including Ghana, on the other hand, pose “significant risks and could potentially worsen investor risk appetite. These conditions will require managing fiscal risks in the outlook for the Ghanaian economy.”

He, however, pointed out that the banking sector is well-positioned to continue with the core objective of financial intermediation and providing support to the growth recovery process.

The banks, he noted, are expected to sustain the strong performance under mild to moderate stress conditions, barring more severe consequences on the real sector from the second wave of the pandemic.

“Policy and regulatory reliefs granted to the industry will be reviewed alongside close monitoring and prompt supervisory actions will be taken to address emerging potential vulnerabilities in the financial sector arising from the pandemic,” he said.

“The gross reserves at US$8.6 billion, translating into 4.1 months of import cover, will provide adequate cushion against potential external vulnerabilities in 2021”. he added.

He said headline inflation, while on a steady declined in the early months of the last quarter of 2020, jumped in December to 10.4 percent outside the target band of 82 percent.

Meanwhile, Ghana has confirmed 5,515 actives cases with 424 deaths.