Economy rebounding from covid-19 impact – BoG

Available data by Bank of Ghana indicates that the Ghanaian economy is on a rebound consistent with other multinational and international research institutions.

According to the Governor of the Bank of Ghana, Dr. Ernest Addison this can be attributed to the evidence of some green shoots in economic activity which had bounced back to pre-lockdown levels.

Speaking at the University of Ghana Alumni lecture on the theme, “Pandemic, The Economy and Outlook, he said business confidence has also improved although the Index remained below pre-lockdown levels.

“Our latest high frequency economic indicators, such as consumer spending, industrial consumption of electricity, and construction activities have all reached pre-lockdown levels. Just yesterday, the Ghana Statistical Service put out an estimate of the third quarter GDP (Gross Domestic Product) growth suggesting that the economy contracted by 1.1% during the third quarter. It must be pointed out that this is consistent with the rebound view as the economy has recovered from a contraction of 3.1% to 1.1% during the quarter”, he emphasized.

The Governor also said recent report from the International Growth Centre (IGC) corroborates this view as employment rates and hours worked per adult which fell substantially in March and April have largely reverted to its pre-Covid levels in August and September.

Banking sector

In the financial sector, Dr. Addison pointed out that the banking sector remains liquid and well positioned to support growth, benefitting significantly from the recent reforms.

“To a large extent, the policy interventions have also helped improve soundness of the banking sector and reduced the potential adverse spillback effects that the banking sector may have had on the macro-financial landscape. The sector remains robust as reflected by the strong Financial Soundness Indicators – Capital adequacy levels are above the regulatory limits, the NPL ratio has declined, and profitability remains strong.”

On the impact of covid-19 on the sector, he said findings revealed that, overall, the banking sector is robust and largely resilient to the pandemic-related shocks, adding, tail risks arising from the changing macroeconomics landscape has had a moderate effect and the banking sector soundness index has improved from the pre-pandemic levels.

“Broadly, the prompt policy response to the COVID19 pandemic, including the freeze on dividend pay-out, reduction in the Cash Reserve Requirement, and the reduction in policy rate supported the sector to build reserves to withstand credit shocks”, he mentioned.

Post-COVID outlook

The Governor said the stage is set to redesign a medium-term macroeconomic framework to return the economy to fiscal consolidation and to further consolidate macroeconomic stability.

This he believes will provide an essential lever for positioning the Ghanaian economy on a path of higher growth, job creation, and faster pace of poverty alleviation.

Public debt levels have risen following the necessary fiscal expansion in the short-term to contain the impact of the pandemic [covid-19].

He explained that there is the need to design a plan to bring down the debt to sustainable levels to contain risks posed to future financing of the budget, exchange rate stability and financial sector stability post Covid-19.

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