BANK OF GHANA MPC MEETING – SEPTEMBER 2020

MPC-Press-Release-September-2020-1

LAST WEEK, THE BANK OF GHANA MPC MEETING – SEPTEMBER 2020 TOOK PLACE. NATURALLY, THE MEETING WAS OVERSHADOWED BY THE CORONA VIRUS PANDEMIC. NEVERTHELESS, THE MPC LEFT THE MONETARY POLICY RATE UNCHANGED AT 14.5%

IN THIS FIRST PART OF THE ARTICLE SERIES, I WILL TAKE A LOOK` AT THE PRESS BRIEFING OF THE MPC. IN THE TWO FOLLOWING ARTICLES, I WILL EXAMINE THE SUMMARY OF ECONOMIC AND FINANCIAL DATA SEPTEMBER 2020. AS USUAL, YOU CAN DOWNLOAD THE MPC PRESS RELEASE IN PDF FORMAT AT THE BEGINNING OF THIS ARTICLE.

LOOKING AT THE GLOBAL ECONOMICAL SITUATION, THE MPC SEES A MIXED PICTURE. ON THE ONE HAND, THE COMMITTEE MENTIONS SIGNS OF RECOVERY. ON THE OTHER HAND, IT RECOGNISES THE USUAL RISK FACTORS. THESE ARE ESPECIALLY THE CORONA VIRUS PANDEMIC, CONTINUING US/CHINA TRADE TENSIONS, AND OTHERS LIKE THE BREXIT NEGOTIATIONS.[FOR ALL THIS, SEE MPC PRESS RELEASE, PAGE 1.] FURTHERMORE, THERE IS THE DANGER OF A SECOND WAVE OF THE VIRUS. DESPITE ALL THAT, THE MPC SEES A SLOW, BUT STEADY GLOBAL ECONOMICAL RECOVERY IN THE MEDIUM TERM.

OF COURSE, THE GLOBAL ECONOMIC SITUATION ALSO INFLUENCES THE RECOVERY IN DEVELOPING COUNTRIES, AND THEREFORE ALSO IN GHANA. ESPECIALLY THE EUROPEAN AND ASIAN MARKETS ARE IMPORTANT TRADING PARTNERS OF AFRICA IN GENERAL AND GHANA IN PARTICULAR. CONSEQUENTLY, EVERY POSITIVE OR NEGATIVE DEVELOPMENT THERE HAS ITS IMPACT ON THE GHANA ECONOMY.

LOOKING AT THE CHANCES FOR A GLOBAL ECONOMIC RECOVERY, COMBINED WITH RELATIVELY STRONG FUNDAMENTALS IN GHANA, THE MPC IS OPTIMISTIC. AS PANDEMIC-BOUND RESTRICTIONS  ARE EASING, ECONOMIC ACTIVITY HAS ALREADY REBOUND. INFLATIONARY TENDENCIES ARE EASING. APART FROM THAT, BUSINESS AND CONSUMER CONFIDENCE IS IMPROVING. [MORE ABOUT THAT IN THE NEXT ARTICLES]. THE FUNDAMENTALS OF THE BANKS ARE STRONG, ESPECIALLY AFTER THE BANKS CONSOLIDATION.

OF COURSE, THE BANK DOES NOT ONLY SEE POSITIVE DEVELOPMENTS. TWO OF THE NEGATIVE COMPONENTS ARE THE INCREASE OF DEBTS, AND THE STILL WEAK FISCAL PERFORMANCE.  WE CANNOT LOOK AT ONE WITHOUT LOOKING AT THE OTHER. THE MPC RECOGNISES THAT MUCH OF THE EXTRAORDINARY INCREASE OF THE DEBT STOCK IS CAUSED BY INCREASED SPENDING BECAUSE OF THE VIRUS. NEVERTHELESS, THE BANK REPEATS WHAT IT HAS COMPLAINED ABOUT ON THE LAST MEETINGS. THAT IS THAT THE FISCAL SITUATION MUST IMPROVE IN ORDER TO FIND A LASTING SOLUTION TO THE DEBT PROBLEM.

IN ALL, MPC SEES A RECOVERY OF THE ECONOMY BY THE SECOND QUARTER OF 2021. THE COUNTRY EXPERIENCED A DECLINE OF GDP IN THE SECOND QUARTER OF 2020. BUT THE MPC IS MORE OPTIMISTIC FOR THE FUTURE. IT EXPECTS A REBOUND UNTIL THE END OF THE YEAR.

NOW, I THINK THAT EVERYTHING DEPENDS ON THE GOVERNMENT, THE BANK OF GHANA, AND ESPECIALLY THE GHANAIANS THEMSELVES. GOVERNMENT AND THE BANK OF GHANA HAVE LAID THE FOUNDATION FOR A MEDIUM-TERM . NOW IT DEPENDS ON US WHAT WE MAKE OUT OF IT.

WEIGHING ALL THE POSITIVE AND NEGATIVE ASPECTS, THE BANK OF GHANA MPC MEETING – SEPTEMBER 2020 LEFT THE MONETARY POLICY RATE UNCHANGED AT 14.5%.

STAY TUNED FOR THE NEXT ARTICLES.

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