By Elorm Desewu
Credit to the private sector is recovering to the pre-pandemic levels, reflecting commercial banks’ portfolio rebalancing.
According to the Bank of Ghana, (BoG), private sector credit increased significantly by 33.7 percent in June 2022, compared with 6.8 percent in the same period of 2021. However, in real terms, the private sector credit recorded a 3.0 percent growth.
A year ago in June 2021, real private sector credit had contracted by 0.97 percent. The latest credit conditions survey of banks revealed tightened credit stance on loans to enterprises and households. Notwithstanding these tight credit conditions across the industry, banks’ credit extension improved during the review period.
New advances to the economy broadened across the industry, with 20 out of 23 banks extending new credit. Total new advances as of June 2022 was GH¢24.6 billion representing 54.0 percent year-on-year growth, compared to GH¢15.9 billion which was1.0 percent growth recorded for the same period of 2021.
Results from the Bank’s latest confidence surveys conducted in June 2022 showed significant softening of business and consumer sentiments. While consumers felt less optimistic about future economic conditions, businesses were concerned about the impact of high cost of raw materials, rising labour costs, exchange rate volatility, and weak consumer demand.
These conditions adversely impacted business optimism and prospects. At the same time, the Purchasing Managers’ Index (PMI), which provides information on inventory accumulation and new orders at the firm level, also declined.
