BOG MPC MEETING NOVEMBER 2020 – A SUMMARY AND COMMENT

97th-MPC-Press-Release-23rd-November-2020-2

Summary-of-Economic-Financial-Data-November-2020-2

THE MONETARY POLICY COMMITTEE [MPC] OF THE BANK OF GHANA [BOG] HELD ITS 97TH MEETING LAST WEEK. FOLLOWING, I PRESENT AN ARTICLE SERIES DUBBED “BOG MPC MEETING NOVEMBER 2020 – A SUMMARY AND COMMENT”.

AS USUAL THE ARTICLE SERIES STARTS WITH A LOOK AT THE MPC PRESS RELEASE. IN THE FOLLOWING THREE PARTS, I ANALYSE THE SUMMARY OF ECONOMIC AND FINANCIAL DATA. THE ARTICLE SERIES WILL CONCLUDE BY THE MIDDLE OF NEXT WEEK.

AS ALWAYS, YOU CAN DOWNLOAD BOTH BOG DOCUMENTS AT THE BEGINNING OF THIS ARTICLE.

THE MPC PRESS RELEASE STARTS WITH A GLOBAL OUTLOOK. THIS OUTLOOK APPEARS TO BE MORE POSITIVE THAN SINCE THE BEGINNING OF THE PANDEMIC. MAINLY,  THE MPC BASES THIS ASSESSMENT ON THE HOPES OF A VACCINE. FURTHERMORE, THE SUPPORT OF MAJOR CENTRAL BANKS PLAYS AN IMPORTANT ROLE. LASTLY, THE INFLATION RATE IN MAJOR DEVELOPED COUNYTIES IS LOW. THIS LEADS TO LOWER BORROWING RATES, AND ULTIMATELY, TO MORE INVESTMENT IN THE NEAR FUTURE.

FOR MY UNDERSTANDING, THE MPC SEES THE RISING STOCK MARKET INDECES TOO MUCH AS SIGN FOR ECONOMIC IMPROVEMENT. WE MUST SEE THAT THE STOCK MARKET AND THE MAINSTREAM ECONOMY ARE NOT THE SAME. AGAINST THE HOPES OF MANY PEOPLE FOR A V-SHAPED OR A U-SHAPED RECOVERY, THERE IS A K-SHAPED RECOVERY.

[V-SHAPED RECOVERY MEANS SHARP FALL, AND, IMMEDIATELY,  A SHARP RECOVERY. U-SHAPED MEANS SHARP FALL, THEN A LONGER FLAT PERIOD, THEN SHARP RECOVERY. K-SHAPED MEANS SHARP FALL, THEN SPREAD OF DEVELOPMENT. THE RICH GETTING RICHER, AND THE POOR GETTING POORER.]

BUT GENERALLY, I AGREE WITH THE ASSESSMENT OF THE MPS. FOCUSSED ON THE PANDEMIC, THE MPC ADVISES TO BE CAUTIOUS ABOUT THE GLOBAL ECONOMIC DEVELOPMENT. THIS IS IN VIEW OF A SECOND OR EVEN THIRD WAVE OF THE PANDEMIC.

THE MPC KEEPS THIS LINE OF JUDGMENT FOR THE DEVELOPMENT OF THE DOMESTIC ECONOMY – CAUTIOUSLY OPTIMISTIC. IT POINTS OUT THAT MOST OF THE ECONOMIC INDICATORS SHOW A POSITIVE DEVELOPMENT. ESPECIALLY, THE ECONOMIC ACTIVITY INCREASED RECENTLY. THE SAME HAPPENS WITH THE CONSUMER AND THE BUSINESS CONFIDENCE. THE CONSUMER CONFIDENCE IS EVEN HIGHER THAN BEFORE THE PANDEMIC. ALTHOUGH STILL LOWER THAN THEN, THE BUSINESS CONFIDENCE INCREASED STEADILY IN THE RECENT MONTHS.

THESE SIGNS CORRESPOND WITH OTHER DEVELOPMENTS ON THE LOCAL FRONT. THE FINANCIAL SECTOR – EXCLUDED THE STOCK MARKET – IS STABLE. LOANS TO THE PRIVATE HOUSEHOLDS AND BUSINESSES INCREASED, WHILE THE RATE OF NON-PERFORMING LOANS WENT DOWN AGAIN. [I WILL ANALYSE ALL THE FIGURES  IN THE FORTHCOMING ARTICLES OF THIS SERIES.]

STILL, THE MPC SEES A MAJOR CHALLENGE FOR THE LOCAL ECONOMIC DEVELOPMENT IN THE FISCAL PERFORMANCE. A FUTURE GOVERNMENT MUST SURELY FOCUS ON THIS SECTOR OF THE ECONOMY. IT MUST FIND WAYS TO INCREASE REVENUES IN ORDER TO CONTRIBUTE TO THE RISE OF THE ECONOMY.

WEIGHING ALL HOPES AND CHALLENGES, THE MPC KEPT THE MONETARY POLICY RATE AT 14.5 PERCENT. THE FUTURE DIRECTION OF THE ECONMY WILL SHOW HOW THE BOG VALUES THE MONETARY POLICY RATE IN THE FORTHCOMIND MONTHS.

BOG MPC MEETING NOVEMBER 2020 – A SUMMARY AND COMMENT SHOWS THAT THE MPC OF THE BOG HAS A GROSSLY POSITIVE OUTLOOK FOR THE GHANAIAN ECONOMY.

STAY TUNED FOR THE ANALYSIS OF THE FINANCIAL DATA IN THE COMING DAYS.

 

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