Governor okays economic growth as policy rate is stayed

Dr. Abdul-Nashiru Issahaku, the Governor of the Bank of Ghana (BoG), says Ghana’s economy is on the path of growth and there is a positive outlook for the rest of the year.

Speaking at his first Monetary Policy Committee media conference, Dr. Issahaku said the updated Composite Index of Economic Activity (CIEA) indicated a pick-up in economic activity in the first quarter of 2016, although at a slower pace than a year ago.

Indicators for this growth, he noted, included industrial consumption of electricity, port activities, cement sales and domestic VAT collections.

Additionally, the recent confidence surveys for both businesses and consumers such as by the Association of Ghana Industries (AGI) reflected positive sentiments supported by relative stability in the cedi and significant improvement in electricity supply, he said.

“It seems like we’ve turned the corner and we need to continue to do what we’re doing now or strengthen it to gain more traction so that the growth trajectory will stay on course and continue to move northwards,” he stated.

Dr. Issahaku said, however, that although the growth outlook was broadly positive, it was contingent on sustained improvements in energy supply, continued stability in the local currency and additional oil and gas production.

He said risks such as tight credit conditions and continued tightness in the fiscal stance might moderate the pace of economic activity.

It is in this connection, he said, that the bank decided to further tighten the policy stance, thus the decision to maintain the rate at 26 per cent.

Dr Issahaku said headline inflation fell from 19.2 percent in March to 18.7 per cent in April as non-food inflation slowed, while monthly inflation rates also slowed, supported by stability in the exchange rate.

The latest surveys of businesses, consumers and the financial sector conducted in April also reflect declining trends in inflation expectations based on the positive perceptions about exchange rate movements and improved energy supply.

“The latest forecast reinforces the earlier forecasts that inflation will gradually decline from the second quarter towards the target band by mid-2017, barring any unanticipated shocks,” he stated.

However, he noted there were risks to the inflation outlook, including unanticipated upward adjustments in utilities and petroleum product prices and possible second round effects from such adjustments on prices.

Dr. Issahaku also noted that the slow but persistent pickup in food inflation, since August 2014, was also a source of concern for inflation and stressed the need to focus more on the Agricultural sector’s productivity.

He noted that there was also the need, as the roles of central banks evolved, to consider how the BoG could help boost the sector.

President John Dramani Mahama, on April 25, 2016, swore in Dr Issahaku to replace Dr Kofi Wampah, took an early retirement, as Governor of the Central Bank.


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