Global economic crisis contracting - Duffuor

Accra, Aug. 25, GNA - Dr Kwabena Duffuor, Minister of Finance and Economic Planning on Tuesday said current macroeconomic indicators pointed to a slow down on the impact of the global economic recession. However, he said, there was not as yet any concrete evidence of the start of a firm recovery of the crisis.

Dr Duffuor said this when presenting a supplementary budget to give an overview of the country's economic performance to Parliament in Accra.

He said on the domestic front, the year began with some uncertainty from the large macro-economic imbalances and the global financial melt down.

The Finance Minister, however, said the anxiety of markets and policy makers was giving way to hope, greater confidence and optimism, adding "the Ghanaian economy is beginning to witness some consolidation of the gains associated with both fiscal and monetary prudence." He said inflation pressures built up in 2008 remained strong in the first quarter of the year, causing inflation to rise to 20.5 per cent at the end of March, 2009.

Dr Duffuor said inflation had hovered around 20 per cent with a rate of 20.6 per cent recorded in April 2009, 20.1 per cent in May 2009 and 20.7 per cent in June 2009.

He said the slight increase in the June inflation rate, reflected mainly the pass-through effect of the petroleum price increases, which caused the monthly non-food prices to rise by 3.9 per cent in June 2009, compared to a rise of 2.4 per cent in May 2009.

Dr Duffuor said, however, inflation had started falling as the month of July 2009 registered a rate of 20.5 per cent. He said the foreign exchange market exhibited some volatility of the Cedi against the three core currencies in the first quarter, broadly following similar trends in the last quarter of 2008. The Finance Minister said recent developments, however, indicated a much slower pace in the rate of exchange of the cedi to the US Dollar. He said data from the interbank market showed that exchange rate of the Cedi to the US dollar depreciated from 5.1 per cent in January 2009 to about 0.2 per cent in June 2009.

On the foreign exchange bureau market, Dr Duffuor said the rate of depreciation of the Cedi to the US dollar was even slower, from 6.8 per cent to 0.1 per cent over the same period. On the exchange rate developments, he said, monetary developments during the first h alf of the year, showed a slow down in money supply growth.

The Finance Minister said broad money supply expanded moderately by 1.9 per cent in the first quarter and by 2.7 per cent in the second quarter.

He said the slow down in monetary growth during the first half of the year was mainly the result of general tightening of domestic credit.

On net claims, Dr Duffuor said government during the period however remained relatively strong.

He said the banking sector continued to remain fairly liquid registering strong asset growth, increased competition and improved profitability during the period.

Dr Duffuor said the sector had proved to be resilient despite the global financial crisis adding, it was well capitalized with no indication of direct exposure to distressed financial institutions or toxic financial assets in other parts of the world.

He said the banking sector had grown and diversified, with banks now offering a wide-range of financial products.

Dr Duffuor said the non-bank financial institutions and microfinance companies had also continued to expand their products and operations to the countryside.