BOG MPC MEETING NOVEMBER 2020 – A SUMMARY AND COMMENT – 2

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

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

BOG MPC MEETING NOVEMBER 2020 – A SUMMARY AND COMMENT – 2 DEALS WITH THE FIRST COMPONENTS OF THE RECENT SUMMARY OF ECONOMIC DATA. THESE ARE:

— PRICE DEVELOPMENTS,

— REAL SECTOR INDICATORS,

— MONEY MARKET RATES, AND

— FOREIGN EXCHANGE RATES.

AS USUAL, YOU CAN DOWNLOAD THE DOCUMENTS IN PDF FORMAT FROM THE BEGINNING OF THIS ARTICLE.

  1. PRICE DEVELOPMENTS                                                                                                             THE CONSUMER PRICE INDEX STABILISED DESPITE THE PANDEMIC. BOTH FOOD PRICES AND NON-FOOD PRICES INCREASED MARGINALLY COMPARED WITH THE MONTH BEFORE. THIS LED TO THE INFLATION RATE DROPPING TO 10.1 PERCENT, SLIGHTLY ABOVE THE INTENDED RANGE OF 8+/-2 PERCENT. IT WAS MAINLY DUE TO A RATHER HEAVY DECREASE IN THE NON-FOOD PRICES. ON THE OTHER HAND, FOOD PRICE INFLATION INCREASED TO 12 PERCENT. CONSEQUENTLY, THE MONTHLY CONSUMER PRICE INFLATION RATE WENT UP SLIGHTLY. A POSITIVE SIGN IS THAT NEARLY ALL CORE INFLATION RATES CAME DOWN, SOME SIGNIFICANTLY. ONLY THE ONE EXCLUDING ENERGY, UTILITIES, VOLATILE FOOD, AND TRANSPORTATION WENT UP. WE CAN EXPECT THAT THE INFLATION RATE WILL APPEAR WITHIN THE ENVISAGED RANGE WITHIN THE COMING MONTHS.

2. REAL SECTOR INDICATORS

THE CIEA, THE MAIN INDICATOR OF ECONOMIC ACTIVITY, ROSE  REMARKABLY IN THE LAST MONTHS. THE REAL CIEA EVEN APPROACHES THE PRE-PANDEMIC FIGURES. THIS SHOWS THAT THE ECONOMY IN GHANA IS ABOUT TO REBOUND FASTER THAN ORIGINALLY EXPECTED. THE DEVELOPMENT IS AT LEAST PARTLY DUE TO A CONSEQUENT PANDEMIC POLICY WHICH THE CURRENT GOVERNMENT HAS INTRODUCED.

THE BANK OF GHANA HAS NOT ISSUED NEW FIGURES ABOUT THE GROSS DOMESTIC PRODUCT [GDP]. BUT, AS THE CORRESPONGING FIGURES HAVE SHOWN, WE CAN EXPECT A STRONG GDP GROWTH IN THE COMING MONTHS.

WE CAN BASE THIS ASSUMPTION ON THE RISE IN CONSUMER AND BUSINESS CONFIDENCE. THE CONSUMER CONFIDENCE HAS EVEN CROSSED 100 MARK. THIS IS A VALUE NOT SEEN BEFORE THE CORONA PANDEMIC. THE BUSINESS CONFIDENCE HAS NOT REACHED PRE-PANDEMIC LEVEL. HOWEVER, A STRONG INCREASE OF 3.5 POINTS COMPARED WITH THE AUGUST DATA ARE A VALUABLE INDICATOR FOR A POSITIVE DEVELOPMENT.

3. MONEY MARKET RATES

MONEY MARKET RATES ARE MIXED. WHEREAS MOST OF THE TREASURY INSTRUMENTS INTEREST RATES GO UP, SOME OF THEM REMAIN STEADY. ESPECIALLY THE LONG-TERM TREASURY INSTRUMENTS INTEREST RATES OF THE SECONDARY MARKET SAW A STRONG INCREASE. [CONSIDER THAT IF THE INTEREST RATES OF TREASURY RATES GO UP, THEIR PRICES GO DOWN. THEY ARE INVERSELY CORRELATED.]

BOTH THE DEPOSIT RATES AND THE RATES FOR TIME DEPOSITS REMAIN CONSTANT. THIS IS ALSO A SIGN FOR THE STABILISATION OF THE ECONOMY IN GHANA.

CONSEQUENTLY, AND UNDER THE RECOGNITION OF ALL OTHER FACTORS, THE BOG REMAINED THE MONETARY POLICY RATE AT 14.5 PERCENT. IN MY OPINION, THIS IS THE RIGHT DECISION. ALTHOUGH THERE IS POSITIVE DEVELOPMENT IN THE ECONOMY, THERE ARE STILL UNCERTAINTIES. THESE UNCERTAINTIES COME PARTLY FROM  UNSURE PROSPECTS OF FOREIGN DIRECT INVESTMENT. [REMARK: THAT’S WHY AfCFTA IS SO NECESSARY.]

4. FOREIGN EXCHANGE RATES

THE CEDI REMAINED ASTONISHINGLY STABLE TOWARDS THE MAIN GLOBAL CURRENCIES US-DOLLAR, EURO, AND POUND STERLING. THE YEAR-TO-YEAR DEPRECIATION IN COMPARISON WITH THE DOLLAR AND THE POUND IS ONLY 3.1 PERCENT. UN THE OTHER HAND, THE CEDI DEPRECIATED TOWARDS THE EURO BY A LITTLE MORE THAN 8 PERCENT. THIS IS MAINLY DUE TO A WEAK US-DOLLAR.

WITH THIS, BOG MPC MEETING NOVEMBER 2020 – A SUMMARY AND COMMENT – 2 COMES TO AN END. NEXT, I WILL CONCENTRATE ON THE FOLLOWING ISSUES:

— COMMODITY PRICES,

— EXTERNAL SECTOR DEVELOPMENTS [CUMULATIVE], AND

— GOVERNMENT FISCAL OPERATIONS [CUMULATIVE.]

STAY TUNED

 

 

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