News Guide Africa

Tag: Monetary policy

  • Outlook of Ghana’s economy is favorable in the short to medium term – Deloitte

    Deloitte

     

     

    Adnan Adams Mohammed

     

    A new report has position Ghana’s economic outlook in the short to medium term as favorable as against economic giant of West Africa, Nigeria.

     

    Base on the first quarter and half year economic trajectory, Deloitte in its West Africa economic outlook report released this month, praised the performance of the Ghanaian economy so far.

     

    The report emphasised that, Ghana’s economy grew by 4.7% year on year in the first quarter of 2024, driven by rapid 6.8% year-on-year growth in the industrial sector. The agriculture and services sectors grew at a slower pace of 4.1% and 3.3% year on year, respectively. The country is recovering from a debt-induced crisis, following the government’s ongoing restructuring of its US$30 million debt.

     

    Also, the implementation of monetary policy measures by the Bank of Ghana has also helped reduce inflation. Ghana has been able to secure approval for two tranches of IMF disbursements so far this year, bringing cumulative disbursements from the IMF to US$1.56 billion since 2023, The international accounting and auditing firm stated in its West Africa economic outlook, August 2024 report.

     

     

    However, it added there are downside risks emanating from the forthcoming general elections in December, high inflation, and elevated interest rates, all of which are weighing on private consumption and investment spending in 2024.

     

    “However, a faster pace of recovery is expected from 2025 onward, driven by an anticipated decline in consumer prices, which will trigger a further cut in interest rates. In addition, mining output is estimated to rise, supported by increased output from the recommissioned Bibiani gold mine and production from the Ahafo North gold mine.

     

     

    “The country’s cocoa output—one of the main drivers of the economy—will encounter volatility as a result of climatic conditions, smuggling, diseases (cacao swollen shoot virus and the black pod, for instance), and global commodity price fluctuations,” the report said.

     

    Rising consumer prices have been one of the major macroeconomic challenges plaguing developing countries, especially in West Africa. While inflation in Ghana now seems to be on a downward slope, it rages on in Nigeria, it added.

     

     

     

  • Inflation to end year at 17%… as BoG tightens monetary control.

     

    Adnan Adams Mohammed

    GCB Capital has predicted an end of year inflation of 17 percent amidst tightening of the monetary policy by the Bank of Ghana.

    GCB Capital further predicts that May inflation will fall to 21% from April inflation of 25%.

    It notes that, the predicted decline will be influenced largely due to base effects. However, there are significant concerns, among market players, about the potential impacts of the recent depreciation of the cedi and its delayed consequences on prices.

    With GCB Capital worried over the “second-round effects”, such is seen as a significant risk to the short-term economic outlook noting that; “The recent rise in ex-pump petroleum prices, leading to increased transport fares, is expected to drive up general prices further.

    “With quarterly utility tariff adjustments yet to be implemented and prevailing economic uncertainties, the risk of near-term inflation remains high.”

    GCB Capital proffered that, such “situation necessitates a persistently tight monetary policy to manage inflation expectations and support the disinflation process.”

    In line with its suggestion, the Monetary Policy Committee (MPC) last week maintained a tight monetary policy stance to counter emerging inflationary pressures from currency depreciation and transport fare increases.

    The MPC’s latest forecasts indicate a slightly elevated inflation profile due to the cedi’s depreciation and recent transport fare hikes.

    BoG

    Adding that, achieving this target hinges on maintaining a strict monetary policy and implementing aggressive liquidity management operations.

    Consequently, GCB Capital acknowledges the MPC’s decision to align with its expectations and the market view, noting that, the evident risks to inflation necessitate continued vigilance and policy strictness.

    According to the central bank, inflation has significantly decreased from 41.2 percent in April 2023 to 25 percent in April 2024. This notable reduction in inflation is observed in both the food and non-food components.

    The central bank attributes the decline in inflation to several factors: relative stability in the local currency, a tighter monetary policy stance, and stable petroleum prices.

    Despite the sharp disinflation from April 2023 to April 2024, inflation remained sticky in the first quarter of the year, hovering around 23 percent with a slight increase in March.

    The sluggish disinflation process can be explained by a reduced supply of some seasonal food items and exchange rate depreciation, particularly impacting non-food inflation.