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Economic recovery: BoG optimistic

Feb. 23, 2017, 6:16 p.m.

ECONOMIC activity is expected to strengthen in 2017 on the back of gradual rebound in credit extension to the private sector and improvement in the macro fundamentals, the Bank of Ghana (BoG) has stated.

“In addition, the expected increase in oil production from the TEN and the Sankofa fields are expected to boost growth further in 2017,” the central bank in its latest Monetary Policy Report outlined.

It however noted that the major risks to the growth outlook include volatile commodity prices and high utility costs.

President Nana Addo Dankwa Akufo-Addo on Tuesday gave the strongest indication yet that “tough, prudent and innovative” measures will be adopted to restore the country to its economic viability. 

The president assured that: “I will not allow the economy to collapse under my watch.”

Outlining measures mapped out to turn the tide, President Akufo-Addo promised to significantly reduce the fiscal deficit this year.

“I am absolute in my confidence that we have the programme, the competence, the commitment, and the goodwill of the people to turn things round [and] by the grace of God we will succeed, “the President stated.


In 2016, economic activity remained modest, against the backdrop of policy tightness, oil and gas production challenges at the Jubilee field, and lingering consequences of the power supply constraints.

The November 2016 update of the Composite Index of Economic Activity (CIEA) also pointed to subdued pace of economic activity, reflecting declines in industrial consumption of electricity, cement sales, tourist arrivals and domestic VAT collection.

But the regulator of the banking industry believes the economic outlook remains more positive than last year.

On inflation, it noted that the recent downward trends in inflation are positive but there were emerging risks in the outlook.

On the upside, BOG said rising global yields and stronger dollar as well as the anticipated hikes in the Fed rate in 2017 with its implications on external financing conditions for emerging and developing economies pose risks to the inflation outlook.

“Also, the impact of the recent exchange rate volatility, persistent increases in food inflation and the higher than targeted fiscal outturn are all upside risks for inflation going forward. The downside risks to the inflation outlook include the continued improvement in inflation expectations alongside deceleration in core inflation is expected to support the downward trends in inflation in the coming months,” it explained.

The central bank however said it will continue to monitor developments and take the necessary policy actions required for the attainment of the medium term inflation target of 8±2 per cent.

A further drop in inflation is expected to trigger lower interest rates and reduce cost of borrowing.

The January 2017 rate was 13.3 percent, the lowest since December 2013. The monthly change rate in January 2017 was 2.8 percent while that for December 2016 was 0.9 percent.

However, five regions – Upper West, Greater Accra, Ashanti, Western and Brong Ahafo – recorded inflation rates higher than the national average of 13.3 percent.