The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has said, in relation to the domestic economy that high-frequency indicators point to continued improvement in economic activity in Ghana.
In the third quarter of 2024, the committee said that the BoG’s high-frequency real sector indicators pointed to a sustained pick-up in economic activity.
The updated real Composite Index of Economic Activity (CIEA) recorded an annual growth of 2.2 percent in September 2024, compared to a contraction of 0.4 percent in the corresponding period of 2023.
“Major drivers of the improvement in economic activity include increased port activity, households and firms consumption of goods and services , construction activities, credit to the private sector, and higher tourist arrivals,” a statement issued after the 121st MPC sitting on Friday November 29 said.
The committee kept the Policy Rate at 27 per cent.
The statement explained that while global economic conditions remain favourable, the strength of the US economy coupled with a strong United States dollar and the possibility of a resurgence in global energy and food prices arising from trade protectionism, geopolitical conflicts, and extreme weather conditions will have to be monitored closely for policy responses to ensure stability in the economy.
It noted that domestic macroeconomic conditions remain stable and the International Monetary Fund External Credit Facility (IMF-ECF) Programme implementation remains on track.
Data observed through October 2024 indicated broad stability in the macroeconomic indicators. Growth outturn so far has been strong, and leading indicators of economic activity is projecting stronger growth in the second half of the year, business and consumer confidence is slowly turning around, core inflation remains broadly stable, the financial sector inflation expectations remain broadly anchored, reserve build-up has been sufficient to provide confidence, and the currency is recording some appreciation, it said.
It added that the third review assessment of the IMF on the economy and on programme implementation also reflected a positive assessment and led to a Staff level Agreement.
“Indications are that the IMF Board will meet in December to assess programme implementation thus far and assess forward-looking prospects of the economy. Sussessful completion of the assessment will likely trigger the release of additional US$360 million in December 2024. This should provide more impetus to stability,” the committee said.
Regarding the local currency, the committee said that the cedi’s rebound observed recently should continue with the dissipation of election-related uncertainties and the improved foreign exchange buffers accumulated by the central bank.
A combination of economic uncertainty brought about by the upcoming elections and the high demand for foreign exchange has led to an exchange rate path that is slightly deviated from the fundamentals. With strong macroeconomic policy implementation and improved foreign exchange availability, the economy should observe a realignment of the trajectory of the exchange rate with the fundamentals.
“Commercial banks have accumulated enough capital buffers to withstand the effects of the external debt restructuring. The latest macro-prudential risk assessment showed that the impact from the Eurobond restructuring would be minimal, given the preemptive provisioning made by banks to account for potential impairments. Banks are therefore expected to continue to remain stable and support economic growth going forward.
“Inflation projections show a slightly elevated profile driven by high and unstable food prices, pass-through of previous exchange rate pressures, fuel prices and utility tariff adjustments. The price increases in food items have been steep in the course and together with a fast-paced depreciating currency earlier on in the year have altered the inflation trajectory and stalled the disinflation process. At the time of the last MPC meeting, average inflation forecast a year ahead which stood at 19.0 percent has increased slightly to 20.1 percent at this forecast round. The horizon for inflation to get back within the target band of 6 – 10 percent has slightly shifted forward to Q42025 from the original forecast period of Q32025.
“In the near-term, strengthening of the currency will augur well for future price developments. Under the circumstances, the Monetary Policy Committee decided to keep the policy rate unchanged at 27 per cent,” the statement said.
