SEPTEMBER MEETING BANK OF GHANA MPC – PART 1

Summary_of_Economic_Financial_Data_September-2019

MPC-Press-Conf-Release_Sept_20_2019

THE MONETARY POLICY COMMITTEE ((MPC) OF THE BANK OF GHANA (BOG) HELD ITS SEPTEMBER MEETING LAST WEEKEND. IT KEPT THE MONETARY POLICY RATE UNCHANGED AT 16%. IN THE FIRST OF THREE ARTICLES I DISCUSS THEE OPINION OF THE MPC AS WELL AS SOME OF THE ECONOMICAL AND FINANCIAL DATA. (YOU CAN DOWNLOAD THE PRESS RELEASE OF THE MPG AND THE SUMMARY AT THE BEGINNING OD THIS ARTICLE. YOU CAN ALSO DOWNLOAD THESE DOCUMENTS FROM THE WEBSITE OF THE BOG.
IN THIS FIRST ARTICLE, I’LL PRESENT THE PRICE DEVELOPMENT, THE REAL SECTOR INDICATORS, AND THE NOMEY MARKET RATES.
1) GENERAL ASSESSMENT
BUT LET’S FIRST OF ALL START WITH THE GENERAL OPINION ABOUT THE GLOBAL AND THE LOCAL ECONOMY.
I CAN AGREE WITH THE MPC’S ASSESSMENT OF THE GLOBAL ECONOMY. THIS IS ESPECIALLY TRUE FOR THE IMPACT OF A WEAKER ECONOMY IN DEVELOPED COUNTRIES ON DEVELOPING ONES.
VIEWING THE LOCAL ECONOMIC DEVELOPMENT, THE MPC INTERPRETS THE DATA A LITTLE BIT MORE POSITIVE THAN I WOULD DO. THE MPC IS OF THE OPINION THAT ECONOMIC GROWTH HAS REMAINED STRONG WITH 5.7% INCLUDED OIL AND 4.3% EXCLUDED OIL. (NOT 4.1%, AS I MENTIONED EARLIER, SORRY!) IT IS TRUE THAT 5.7% IS A RATHER POSITIVE FIGURE; MOST COUNTRIES WOULD BE HAPPY TO HAVE SUCH A GROWTH. BUT WE SHOULDN’T OVERLOOK THE FACT THAT IT’S THE THIRD CONSECUTIVE TERM THAT THE GROWTH DECREASSES. FURTHERMORE, THE GAP BETWEEN GROWTH INCLUDED OIL AND EXCLUDED OIL INCREASES. ALTHOUGH THERE IS NO REASON WHATSOEVER TO CRY ABOUT THE ECONOMIC GROWTH YET. BUT WE SHOULD LOOK AT THE DEVEKOPMENT OF GROWTH IN THE NEXT TERMS MORE CLOSELY.
2) PRICE DEVELOPMENT
THE CONSUMER PRICE INDEX (CPI) WENT DOWN 1.6% TO 7.8% COMPARED WITH AUGUST 2019. WE CAN ATTRIBUTE THIS DOWNWARD DEVELOPMENT MOSTLY TO ITS REVISION AND CHANGED WEIGHING BY THE GHANA STATISTICAL SERVICE (GSS).SUCH CHANGES OF THE UNDERLYING BASKET AND WEIGHING FROM TIME TO TIME IS ABSOLUTELY NECESSARY. WE MUST NOW SEE HOW THE CPI WILL DEVELOP IN THE NEXT MONTHS ON THE BASE OF THE BEW CALCULATION. FOR NOW, THE INFLATION RATE IS OUTSIDE THE RANGE OF 8+/-2% ON THE DOWNWARD SIDE, SET BY THE BOG. THIS IS BY ALL MEANS A GOOD SIGN.
OTHER MEASURES CONCERNING PRICE DEVELOPMENT LIKE THE RELATION OF FOOD PRICE DEVELOPMENT TO NON-FOOD PRICE DEVELOPMENT CANNOT BE DISCUSSED HERE. THIS IS DUE TO THE LACK OF AVAILABLE DATA FOR THIS MONTH. THIS, IN TURN, IS AGAIN DUE TO THE NEW CALCULATION BASE.
3) REAL SECTOR INDICATORS
AS THE BOG ITSELF ADMITTED, THE COMPOSITE INDEX OF ECONOMIC ACTIVITY (CIEA) SLOWED DOWN CONSIDERABLY COMPARED WITH LAST YEAR FROM 4.3% TO 2.1%. ON THE OTHER HAND, THERE IS AN INCREASE IN CIEA FROM 1.5% TO THESE 2.1% COMPARED WITH LAST MONTH. THE CIEA HAS GENERALLY GONE DOWN IN THE LAST MONTHS COMPARED WITH LAST YEAR. BUT FOR MY UNDERSTANDING, IT IS TOO EARLY TO DRAW ANY CONSEQUENCES FROM THAT. WE MUST AT LEAST SEE UNTIL THE END OF THIS YEAR HOW THE FIGURES DEVELOP.
I HAVE ALREADY DISCUSSED THE GROSS DOMESTIC PRODUCT (GDP) BEFORE. BUT IT MIGHT BE.
INTERESTING TO LOOK AT THE CONTRIBUTION OF THE THREE SECTORS, AGRICULTURE, INDUSTRY, AND SERVICES.
a) AGRICULTURE
THE AGRICULTURAL SECTOR OFFERS – AS USUAL – THE LEAST CONTRIBUTION TO GDP OF THE THREE SECTORS. ON THE OTHER HAND, IT GREW 3.1% COMPARED WITH THE LAST TERM. WITH THAT, THE AGRICULTURAL SECTOR IS THE ONLY ONE WITH A GROWTH IN COMPARISON. THIS CAN POSSIBLY BE DUE TO THE WEATHER.
b) INDUSTRY
THE INDUSTRY SECTOR IS THE SECOND BIGGEST CONTRIBUTOR TO GDP. BUT ITS ANNUAL GROWTH FELL FROM 8.4% TO 6.1%. AS MUCH OF THE INDUSTRY ALSO DEPENDS ON THE WEATHER, RAIN MIGHT CONTRIBUTE TO THIS DECREASE. WORRYING IS ONLY THAT THE INDUSTRY SECTOR GROWTH WAS NEAR TO 100% BETTER ON THE SAME MONTH OF LAST YEAR.
c) SERVICES
THE SERVICES SECTOR IS THE LATGEST CONTRIBUTOR TO GDP, IT ALSO LOST COMPARED WITH LAST TERM. BUT THE ANNUAL GROWTH ONLY DECREASED FROM 7.2% TO 6.5%. MOREOVER, CO,PARED WITH ONE YEAR AGO, THE ANNUAL GROWTH INCREASED FROM 0.5% TO 6.5%. THIS GENERALLY SHOWS THAT THE SERVICES SECTOR IS STILL STRONG IN THIS COUNTRY.

LET US FINALLY UNDER THIS PARAGRAPH LOOK AT THE CONSUMER AND BUSSINESS CONFIDENCE INDEXES,
WHEREAS THE CONSUMER CONFIDENCE INDEX WENT LOWER BY ABOUT THREE POINTS, THE BUSINESS CONFIDENCE INDEX ROSE BY APPROXIMATELY 4 POINTS. THE DECREASE IN THE CONSUMER CONFIDENCE IS PROBABLY CAUSED BY THE INCREASE IN UTILITY PRICES. THE BUSINESS CONFIDENCE IS MORE FORWARD LOOKING. THEREFORE, IN MY OPINION, THE CONSUMER CONFIDENCE INDEX WILL ALSO INCRREASE IN THE NECT MONTHS. LET’S SEE…

4) MONEY MARKET RATES
I CONCLUDE THIS ARTICLE WITH A LOOK AT THE MONEY MARKET RATES.THIS LOOK CAN BE RATHER SHORT. TOGETHER WITH THE MONETARY RATE AT 16.00%, NEARLY ALL MONEY MARKET RATES REMAINED THE SAME. THIS INCLUDES THE INTERBANK WEIGHTES AVERAGE.ONLY THE SECONDARY MARKET MOVED TO SOME EXTEND.

 

Leave a Reply

Your email address will not be published. Required fields are marked *