Ghana
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Economic Conditions Improving – BoG

Dr. Ernest Addison – Governor of Bank of Ghana

The Bank of Ghana (BoG) has stated that economic activity in the country is strongly rebounding, with the exchange rate stabilising, inflation dropping, and the level of foreign exchange reserves improving.

According to the central bank, sustained improvement in these indicators should result in the restoration of real incomes and purchasing power of Ghanaians.

Addressing the media in Accra yesterday, the Governor of BoG, Dr. Ernest Addison, noted that the Monetary Policy Committee of the central bank observed the overall improving macroeconomic conditions with relatively strong economic growth and a drop-in inflation in August.

“These developments provide evidence that the policy mix under the three-year IMF Extended Credit Facility (ECF) is beginning to yield results,” he stated.

He said the strong growth outturn observed in the first half of 2023 is expected to continue in the third quarter as indicated by the July 2023 update of the bank’s CIEA.

The governor indicated that also, Ghana’s PMI lends support to the growth outlook, reflecting improving business conditions.

“The results from the confidence surveys so far also indicate continued improvement in business and consumer sentiments influenced by the relative stability in the Ghana cedi, and more recently the resumption of the disinflation process,” he pointed out.

Dr. Addison said the pick-up in confidence is expected to continue for the rest of the year in line with improving macroeconomic conditions.

On the implementation of fiscal policy, he stated that while policies remain consistent with the IMF-supported programme thus far, challenges associated with revenue mobilisation persist and will require additional efforts to safeguard the revenue-led fiscal adjustment programme.

According to him, the country’s external sector position has continued to improve significantly in the first eight months of the year, supported by a current account surplus, reflecting higher gold export receipts, import compression, and lower outflows from the services and income accounts.

“The lower balance of payments deficit, the domestic gold purchase programme, as well as inflows from the mining sector and the liquidation of some short-term external liabilities contributed to rebuilding the country’s reserve buffers,” the BoG boss noted.

In the last quarter of the year, he said reserve accumulation would be further bolstered by the expected inflows from the cocoa syndication loan, the second tranche of the IMF ECF programme, and other multilateral inflows.

Dr. Addison also said the banks’ profitability remained strong in the first eight months of 2023.

“The industry recorded profit-after-tax of GH¢5.7 billion, representing a 41.4 percent annual growth, compared with 26.5 percent growth recorded last year.

“Specifically, net interest income increased sharply by 37.9 percent to GH¢13.5 billion, while net fees and commissions went up by 27.3 percent to GH¢2.9 billion,” he disclosed.

According to him, the key financial soundness indicators remained broadly stable.

He added that profitability indicators improved, with Return-on-Equity (ROE) at 36.9 percent in August 2023 from 23.0 percent in August 2022, while Return-on-Assets (ROA) increased to 5.4 percent from 4.7 percent in the same comparative period.

He also pointed out that liquidity indicators for the industry improved during the period under review.

“Capital Adequacy Ratio (CAR) adjusted for the regulatory reliefs was 14.2 percent in August 2023, higher than the revised prudential minimum of 10 percent.

“The industry’s NPL ratio however increased to 20.0 percent in August 2023, from 14.3 percent in August 2022, attributable to elevated credit risk associated with the lagged effect of the macroeconomic crisis in 2022,” he said.

He revealed that international prices of Ghana’s major export commodities recorded some gains in August 2023, after consistent declines in the previous months.

“Crude oil price increased by 4.0 percent to US$84.6 per barrel in August 2023 due to expectations of tight crude oil supplies following Saudi Arabia and Russia’s decision to extend production cuts for the rest of the year.

“Cocoa prices recorded a year-to-date growth of 37.1 percent to US$3,480.3 per tonne in August 2023 on account of tight supplies in West Africa,” he said.

According to him, gold prices also gained 6.8 percent year-to-date to settle at US$1,918.8 per fine ounce, largely due to expectations of a pause in the US policy tightening cycle.

“In the first eight months of the year, the trade account registered a surplus of US$2.0 billion, compared with US$1.6 billion recorded in the same period of last year,” he pointed out.

He added, “This was largely due to import compression, and a decline in exports.”

Dr. Addison said total exports earnings declined by 8.9 percent year-on-year to US$10.8 billion, driven mainly by a significant drop in crude oil and cocoa products exports.

“In the review period, crude oil exports decreased sharply by US$1.5 billion due to an 18.8 percent dip in production volumes as well as a 23.6 percent decline in prices.

“Exports of cocoa beans and products remained broadly unchanged at US$1.6 billion compared with the same period in 2022, as the higher production volumes of the beans balanced out the lower volumes of cocoa products. Gold exports increased to US$4.7 billion, on account of an 8.5 percent rise in the volumes exported and 1.9 percent increase in prices,” he stated.

He said earnings from other exports, including non-traditional exports, decreased marginally by 1.6 percent to US$2.1 billion, and added, “Total imports contracted by 14.7 percent to US$8.8 billion, from US$10.3 billion a year earlier.”

By Ernest Kofi Adu