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Libyan Newswire

Recent Macroeconomic Developments —Highlights


Nov 2014

Global economic growth in the first half of 2014 was slower than expected, according to the October 2014 update of the IMF’s World Economic Outlook (WEO)—  with growth now projected at 3.3 percent and 3.8 percent in 2014 and 2015 respectively, down from 3.4 and 4 percent that were projected earlier.

In the advanced economies, growth is projected to pick up faster in the US, but weak in the Euro area and Japan while in the emerging markets like Brazil and Russia, growth is projected to stay subdued, but to remain high in emerging Asia, with a modest slowdown in China and a pickup in India.


On the other hand, sub-Saharan Africa is expected to continue growing at a fast rate, expanding by about 5.1 percent in 2014 and 2015, driven by sustained infrastructure investment, buoyant services sectors, and strong agricultural production.

Dr Henry Kofi Akpenamawu Wampah, Governor of the Bank of Ghana (BoG), made these known at a news conference in Accra on Wednesday at the end of the 62nd Regular Meeting of the Monetary Policy Committee (MPC).

On inflation, Dr Wampah said a review of the global economic environment also indicated that Inflation generally remained below central bank targets in advanced economies, an indication that many of these economies still had substantial output gaps, while in the  euro area, inflation had declined further to 0.31 per cent in September, but remained higher and broadly stable in emerging market economies.

The BoG Governor disclosed that in the international commodity markets, crude oil was projected to average US$98 per barrel in Q4:2014 and US$84.6 per barrel in 2015 with gold prices currently hovering just above US$1,170 per fine ounce and were projected to average $1,286 in 2015 while cocoa was trading around US$2,915 per tonne and projected to move above US$3,000 per tonne in 2015.

On the Domestic Economy as regards Growth and Inflation, Dr Wampah said, recent official data on the pace of economic activity in the second quarter confirmed the assessment based on the Composite Index of Economic Activity (CIEA) in the last MPC round, with the Ghana Statistical Service (GSS) reporting a quarter-on-quarter GDP growth of 3.3 per cent in the second quarter of 2014 while year-on-year growth in the second quarter of 2014 was 5.3 per cent, driven mainly by the agricultural sector.

The GSS, he said, projected an annual growth rate of 6.9 percent for 2014 while an update of the BoG’s CIEA for 2014:Q3 suggested a positive year-on-year growth of 7.8 per cent at the end of September 2014, compared with 9.6 per cent in the corresponding period last year.

The seasonally adjusted RCIEA, he said, registered a growth of 5.4 percent at the end of September 2014, compared with a growth of 8.3 per cent for the corresponding period in 2013.

According to Dr Wampah, the Bank’s survey of consumer sentiments in October 2014 showed that consumers were upbeat about the general economic conditions, a situation reflected in their responses to questions relating to current macro-economic situation, welfare issues as well as overall expectations (employment and economic activity) about key economic indicators.

He said the overall index improved to 85.6 from 77.5 recorded in August 2014 while business confidence rebounded in the third quarter as suggested by the Bank of Ghana’s survey of Business Confidence. The index, he said, improved to 88.7 from 78.6 in the second quarter.

He said, prices, on the other hand, continued to rise since the last meeting as headline inflation reached 16.5 per cent against the backdrop of the pass-through of the depreciation of the cedi which pushed up prices of fuel, transport and imported food items, with food inflation at 5.8 per cent, up from the 5.1 per cent recorded in August 2014 while non-food inflation was barely unchanged at 24.1 per cent compared to 24.0 per cent recorded in August.

On Monetary developments, Dr Wampah said Broad Money (M2+) grew by 33.6 per cent year-on-year at the end of September 2014 to GH¢32.1 billion, compared with a growth of 17.6 per cent in the corresponding period last year.

This, he said, was driven largely by developments in the net domestic assets of the banking sector, on account of strong growth in domestic credit particularly to the energy sector.

Reserve money, he said,  also expanded by 46.8 per cent in October 2014, compared to 18.7 per cent in the corresponding period last year, largely driven by significant increases in net foreign assets of the central bank.

He said the banking industry continued to grow as total assets increased by 41.0 per cent year-on-year to GH¢47.8 billion in September 2014 compared to a growth of 35.4 per cent to GH¢33.9 billion in the same period last year, with that of the total assets, gross advances constituting 50.1 per cent compared with 46.6 per cent a year ago. 

Dr Wampah said the latest credit conditions survey also showed an easing of credit to large enterprises and households while, on the other hand, credit to small and medium enterprises and loans for mortgages, continued to be tightened and that in terms of maturity, long term credit continued to be tightened while short term credit availability improved during the period.

He said in nominal terms, credit to the private sector grew by 47.5 per cent in September 2014, compared to 26.6 per cent in the same period last year with Real credit growth being 26.6 per cent compared to 13.1 per cent a year ago, adding that the credit growth was mainly funded by increased mobilisation of domestic deposits by the banking system.

He disclosed that Non-performing Loans (NPL) ratio, adjusted for fully-provisioned loans, increased to 5.4 per cent in September 2014 compared with 5.1 per cent in the corresponding period last year.

However, he said, the unadjusted NPL ratio declined from 12.9 per cent to 12.1 per cent in the same period, with the capital adequacy ratio for the banking industry falling marginally to 17.0 per cent compared to 18.3 per cent in the same period last year, but remained well above the prudential limit of 10 per cent.

Dr Wampah said interest rates generally trended up on the money market between December 2013 and September 2014 with the rate on the 91-day instrument increasing to 25.5 per cent from 19.2 per cent; that on the 182-day instrument increasing to 26.4 per cent from 18.7 per cent; that on the 1-year note rising to 22.5 per cent from 17 per cent, and the rate on the 2-year increased to 23 per cent from 16.8 per cent, while the 3-year bond rate rose to 25.5 per cent from 19.2 per cent.

The weighted average interbank rate, he said, increased to 24.2 per cent from 16.3 per cent in December 2013, with average lending rates of the banks rising to 27.8 per cent from 25.6 per cent in December 2013 while the average rate on 3-month term deposits increased to 13.5 per cent from 12.5 per cent.

Source: ISD (G.D. Zaney)