BANK OF GHANA MPC NOVEMBER MEETING – PART 1

MPC-Press-Release-Nov.-2019 Summary_of_Economic__Financial-Data_November-2019

Summary_of_Economic__Financial-Data_November-2019

BANK OF GHANA MPC NOVEMBER MEETING – PART 1

THE MONETARY POLICY COMMITTEE (MPC) OF THE BANK OF GHANA (BOG) HELD ITS NOVEMBER MEETING LAST WEEKEND. IT ALSO PUBLISHED THE SUMMARY OF THE ECONOMIC AND FINANCIAL DATA FOR GHANA NOVEMBER 2019. YOU CAN DOWNLOAD BOTH DOCUMENTS FROM THE TOP OF THIS ARTICLE.

IN THE FIRST PART, I’LL COMMENT BRIEFLY ON THE PRESS RELEASE OF THE MPC. THEN I’LL DISCUSS PRICE DEVELOPMENTS, REAL SECTOR INDICATORS, AND MONEY MARKET RATES.

  1. MPC PRESS RELEASE

AS USUAL, THE MPC STARTS WITH JUDGING THE GLOBAL ECONOMIC OUTLOOK. I CAN AGREE COMPLETELY WITH THE MPC, AS THEY COMMENT ON THE INFLUENCE OF TRADE UNCERTAINTIES ON DEVELOPING ECONOMIES. OF COURSEM THERE IS THE HOPE THAT TRADE TALKS LEAD TO A WEAKENING OF THESE UNCERTAINTIES IN THE NEAR FUTURE.

VIEWING THE LOCAL ECONOMIC DEVELOPMENT, THE MPC HAS A MAIN;Y POSITIVE OUT LOOK. THE ONLY NEGATIVE DROP IS THE FISCAL POSITION OF THE COUNTRY. UNFORTUNATELY, A WEAKER FISCAL POSITION MIGHT AFFECT OTHER SECTORS OF THE ECONOMY, IF NOT TREATED URGENTLY. I WILL DISCUSS THE FISCAL POSITION OF THE ECONOMY IN ONE OF THE FORTHCOMING ARTICLES.

PERHAPS THE MOST IMPORTANT POINT IN THE PRESS RELEASE FOLLOWS AT ITS END. THERE, THE MPC REVIEWS THE CURRENT LENDING PRACTICES IN THE BANKING SECTOR. INTERESTINGLY, THE MPC ALSO SUGGESTS AND INTRODUCES MEASURES TO ENCOURAGE THE SECTOR TO LEND MORE TO THE PRIVATE SECTOR. BETTER BORROWING CONDITIONS – ESPECIALLY BETTER INTEREST RATES – WILL LEAD TO AN INCREASE IN THE USE OF PRODUCTIVE CAPITAL. AS THE FINANCIAL SECTOR IS EXTRAORDINARILY IMPORTANT TO EVERY ECONOMY, BETTER LENDING CONDITIONS WILL ALWAYS HAVE A POSITIVE IMPACT.

PRICE DEVELOPMENTS

THE PRICE DEVELOPMENTS APPEAR TO BE STABILE. ALTHOUGH  SOME PARTS CRITICISED THE REBASING OF THE UNDERLYING BASKET, IT WAS SURELY NECESSARY.

AFTER REBASING, THE CONSUMER PRICE INDEX (CPI) FELL UNDER THE 8+/-2% BENCHMARK. IT REMAINED LIKE THAT SINCE THE BEGINNING, WITH THE FOOD PRICE INFLATION BEING  LOWER THAN THE NON-FOOD ONE. THE REASON FOR THIS MIGHT BE SEASONALLY.

THE MPC EXPECTS THE INFLATION RATE TO RISE TO WITHIN THE BENCHMARK BECAUSE OF THE CHRISTMAS SEASON. I PERSONALLY BELIEVE THAT THE INFLATION RATE REMAINS BELOW THE BENCHMARK. BUT I MIGHT BE WRONG…

REAL SECTOR DEVELOPMENTS

THE FIRST ISSUE TO LOOK AT IS THE INDICATOR OF ECONOMIC ACTIVITIES (CIEA).

THE CIEA WENT DOWN A LITTLE COMPARED WITH LAST YEAR’S SAME MONTH  FROM 5.9% TO 4.4%. ON THE OTHER HAND, IT PICKED UP FROM 3.6% TO 4.4% COMPARED WITH LAST MONTH. THIS SHOWS THAT ECONOMIC ACTIVITY IS STILL STRONG IN THIS COUNTRY. THE TREND REMAINS ALMOST THE SAME IN THE LAST MONTHS. THEREFORE, WE CAN EXPECT THAT THE TREND IS CONSTANT IN THE FORESEEABLE FUTURE.

THIS POSITIVE DEVELOPMENT GOES IN LINE WITH BOTH CONFIDENCE INDEXES. THE BUSINESS CONFIDENCE INDEX ROSE SIGNIFICANTLY BY 1.5 POINTS. ON THE OTHER HAND, THE CONSUMER CONFIDENCE INDEX FELL BY 0.4 POINTS. IT’S THE THIRD TIME IN A ROW THAT THE CONSUMER INDEX FELL. BUT TAKING INTO CONSIDERATION THE VARIOUS GOVERNMENT INITIATIVES, WE CAN SURELY EXPECT THE CONSUMER CONFIDENCE INDEX TO FOLLOW THE BUSINESS ONE SOON.

THE LAST IN THE REAL SECTOR INDICATORS IS THE GROSS DOMESTIC PRODUCT (GDP). HERE ARE NO NEW FIGURES AVAILABLE. BUT INDICATIONS  SHOW THAT THE GDP INCL. OIL WILL AT LEAST APPROACH 7.0% BY THE END OF THE YEAR.

MONEY MARKET RATES

THE MONEY MARKET RATES BASICALLY REMAINED THE SAME. ONLY THE SECONDARY MARKET MOVED. THE YIELDS FOR 7 YEAR AND 15 YEAR BOND WENT UP. ON THE OTHER HAND, THE 6 YEAR AND THE 20 YEAR BOND WENT DOWN. THE 10 YEAR BOND REMAINED UNCHANGED.

ALSO, ALL DEPOSIT RATES REMAIN THE SAME. HOWEVER, THE AVERAGE LENDING RATE WENT DOWN AGAIN. THIS IS MOSTLY DUE TO THE DECLINE IN THE RATE OF NON-PERFORMING LOANS. THE BANK OF GHANA ALSO CONTRIBUTED TO THIS THROUGH ITS STABILISATION MEASURES FOR THE FINANCIAL SECTOR.

IN THE SECOND PART OF MY ARTICLE SERIES, I WILL DISCUSS THE FOLLOWING ISSUES.

— FOREIGN EXCHANGE RATES (INTERBANK),

— COMMODITY PRICES,

— RXTERNAL SECTOR DEVELOPMENTS, AND – MOST IMPORTANTLY

— GOVERNMENT FISCAL OPERATIONS.

SO FAR – BANK OF GHANA MPC NOVEMBER MEETING – PART 1

STAY TUNED!

 

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