SUMMARY OF ECONOMIC AND FINANCIAL DATA – PART 2

IN THE LAST PART OF MY ARTICLE SERIES THAT DEALS WITH THE ECONOMIC AND FINANCIAL SITUATION AND DATA IN GHANA, I WILL PRESENT THE FOLLOWING ISSUES:
—EXTERNAL SECTOR DEVELOPMENTS;
— GOVERNMENT FISCAL OPERATIONS;
— MONETARY INDICATORS;
— BANKING SECTOR INDICATORS; AND .
— STOCK MARKET PERFORMANCE.

1) EXTERNAL SECTOR DEVELOPMENTS
THIS CHAPTER IS CONCERNED WITH THE TRADE BALANCE AND THE BALANCE OF PAYMENT
THERE IS A SURPLUS IN THE TRADE BALANCE SINCE THE BEGINNING OF THE TIME UNDER REVIEW – THAT IS JUNE 2018. BUT THE DATA FOR JUNE 2019 SHOW THAT IT IS THE HIGHEST WITHIN THIS TIMEFRAME. AT THE BEGINNING OF THIS YEAR, THE TRADE SURPLUS WAS DOWN CONSIDERABLY, BUT IT RECOVERED IN THE LAST MONTHS. STILL, GOLD EXPORTS ARE THE HIGHEST CONTRIBUTOR TO THE TRADE SURPLUS. THIS IS FOLLOWED BY OIL AND COCOA.

UNFORTUNATELY, OTHER EXPORTS APART FROM THESE COMMODITIES ARE NOT AS RELEVANT AS THEY SHOULD BE, NEVERTHELESS, THERE WAS A SLIGHT INCREASE OF OTHER EXPORTS IN THE LAST MONTHS. SOME GOVERNMENTAL INITIATIVES IGNITE THE HOPE THAT EXPORTS OF OTHER COMMODITIES AND VALUE-ADDED PRODUCTS WILL INCREASE IN THE TIME TO COME.

THE CURRENT ACCOUNT BALANCE AS PART OF THE BALANCE OF PAYMENT SAW A SLIGHT INCREASE OF 0.1% OF GDP IN JUNE 2019. IT IS ONLY THE SECOND TIME THAT THERE WAS A POSITIVE CURRENT ACCOUNT BALANCE WITHIN THE YEAR UNDER REVIEW. ALTHOUGH THERE WAS A DECREASE IN THE PERCENTAGE FROM 0.4 TO 0.1 FROM THE FIRST TO THE SECOND QUARTER OF 2019, CHANCES ARE TO REMAIN IN POSITIVE TERRITORY IN THE FORESEEABLE UTURE.
BOTH CAPITAL AND FINANCIAL ACCOUNT BALANCE AND THE OVERALL BALANCE OF PAYMENT SHOWED THE SAME DEVELOPMENT FROM THE FIRST TO THE SECOND QUARTER 2019.

FURTHERMORE, THE GROSS AND NET INTERNATIONL RESERVES SHOWED THE SAME TREND, SLIPPING FROM 8950.9 –EQUALLING 4.5 MONTHS COVER – TO 8581.2 – EQUALLING 4.3 MONTHS COVER – FOR GROSS NET COVERAGE, ON THE OTHER HAND, NUMBERS DECREASED FROM 5577.8 TO 5174.5. IT IS NEVERTHELESS A LITTLE BIT WORRYING THAT THE COVERAGE WENT DOWN FOR THE THIRD MONTH IN A ROW.

2) GOVERNMENT FISCAL OPERATIONS
WE SHOULD FOCUS HERE MAINLY ON THE PUBLIC DEBT. TOTAL PUBLIC DEBT IN CEDIS ROSE TO AROUND 200 BILLION CEDIS IN THE LAST MONTH. ALTHOUGH IT IS A COMPARATIVELY LOW RISE, TWO THINGS ARE WORRYING. FIRST, THE PUBLIC DEBT ROSE EVERY MONTH WITHIN THE LAST YEAR. SECOND, THE DEBT/GDP RATIO IS NOW 58.1%. THIS IS DANGEROUSLY NEAR TO THE ACCEPTABLE LIMIT OF 60%. REMEMBER THAT WE ARE NOT LIVING IN A COUNTRY LIKE THE USA OR JAPAN, WHERE A HIGHER DEBT/GDP RATIO IS ACCEPTABLE.

CONTRARY TO THE DEVELOPMENT IN REALITY, IT WOULD ALSO BE BETTER IF THE DOMESTIC DEBT WOULD BE HIGHER THAN THE FOREIGN DEBT. THAT IS BECAUSE WE COULD PAY THE DOMESTIC DEBT BACK IN LOCAL CURRENCY. FOREIGN DEBTS MUST MOST OF THE TIME BE PAID BACK EITHER IN US-DOLLAR OR IN EURO.

3) MONETARY INDICATORS
ALL MONETARY AGGREGATES SHOWED A HIGHER FIGURE THAN THE MONTH BEFORE. THIS IS DESPITE THE FACT THAT THE RESERVE MONEY DECREASED TO 8.8%, COMPARED WITH 11.3% THE MONTH BEFORE. THE RISE IN THE BROAD MONEY –M2- WAS MAINLY DUE TO A RISE IN NET FOREIGN ASSETS, LESS DUE TO A RISE IN NET DOMESTIC ASSETS.
PRIVATE SECTOR CREDIT ADVANCED IN NOMINAL AS WELL AS IN REAL RATES. ALTHOUGH THE ANNUAL REAL GROWTH RATE WENT SOUTHWARDS, THERE IS A GOOD SIGN. THAT IS THAT BOTH THE ANNUAL AND THE REAL RATE ARE THE HIGHEST IN THE TIMEFRAME OF LAST YEAR. IT SHOWS MORE PUBLIC CONFIDENCE IN THE DEVELOPMENT OF THE ECONOMY, AND ESPECIALLY THE FINANCIAL SECTOR.

4) BANKING SECTOR INDICATORS
THIS LEADS US TO THE DEVELOPMENT OF THE FINANCIAL SECTOR, ESPECIALLY THE BANKS. IT SEEMS THAT THE CLEAN-UP OF THE BANKING SECTOR AND THE DEMAND TO INCREASE THE WORKING CAPITAL OF THE BANKS BEARS ITS FRUITS. NEARLY ALL INDICATORS SHOWED A POSITIVE SIGN. ESPECIALLY THE NON-PERFORMING LOANS (NPL) – ALTHOUGH STILL ON A HIGH LEVEL – ARE ON A ONE-YEAR LOW.
THE CLEAN-UP OF THE FINANCIAL SECTOR CONTINUED MEANWHILE WITH MICROFINANCE INSTITUTIONS. WE CAN ONLY HOPE THAT THE CONSEQUENCES OF THIS CLEAN-UP WILL BE ASS POSITIVE AS THAT OF THE BANKING AREA.

5) STOCK MARKET PERFORMANCE
THIS IS THE LAST OF THE ECONOMIC AND FINANCIAL DATA I WILL EXAMINE BRIEFLY. UNFORTUNATELY, THE STOCK MARKET DID NOT PERFORM AS WELL AS WE COULD HAVE EXPECTED. I MUST ADMIT THAT I ALSO EXPECTED A MORE POSITIVE DEVELOPMENT IN THIS AREA. BOTH THE COMPOSITE AND THE FINANCIAL INDEX ARE NEAR THE ONE-YEAR LOW. REASONS FOR THAT MIGHT BE FEARS ABOUT THE GLOBAL ECONOMIC DEVELOPMENT AS WELL AS INSUFFICIENCIES IN MANAGERIAL QUALITY. I WONDER – AND IN THE FUTURE I WILL EXAMINE IT – HOW MANY COMPANIES ON THE GSE WILL PASS THE MANAGERIAL TENETS OF WARREN BUFFETT.

6) CONCLUSION AND OUTLOOK
THE REASON WHY THERE WAS A DELAY IN PUBLISHING THIS ARTICLE WAS THE MID-YEAR BUDGET REVIEW OF THE MINISTRY OF FINANCE. AS FAR AS IT IS POSSIBLE, I WANTED TO INCORPORATE IT A LITTLE IN THIS ARTICLE. YOU CAN DOWNLOAD IT AT THE END OF THIS ARTICLE AS WELL AS FROM THE WEBSITE OF THE MINISTRY OF FINANCE OF GHANA http://www.mofep.gov.gh
THE CONCLUSIONS OF THE BUDGET REVIEW SUPPORTED MY OPINION ABOUT THE ECONOMIC SITUATION OF GHANA. THERE ARE TWO MAIN CHALLENGES FOR GHANA ON ITS WAY TO ECONOMIC SUCCESS. ONE IS THE ENERGY SITUATION IN THE COUNTRY. HERE, THE MINISTER OFFERED SOME EXPLANATION AND SOME IDEAS OF THE GOVERNMENT HOW TO EXIT THIS DILEMMA. BUT THE GOVERNMENT CAN ONLY SOLVE THIS PROBLEM IN A BIPARTISAN WAY. ONLY THIS CAN ABOLISH THE DANGER THAT FUTURE GOVERNMENTS CAN OVERTURN ANY SOLUTION FOUND.
THE SECOND MAIN PROBLEM IS TO REACH THE TARGETS IN REVENUE AND GRANTS. THIS IS ESPECIALLY IMPORTANT REGARDING INTERNALLY GENERATED REVENUES AND TAXES. PARTLY, THE GOVERNMENT COULD SOLVE THAT BY IMPLEMENTING IT SOLUTIONS TO BROADEN THE TAX AND REVENUE BASE.
GENERALLY, WE CAN SAY THAT THE GOVERNMENT IS ON THE RIGHT TRACK, BUT IT MUST CONCENTRATE ON SOLVING THESE MAIN ISSUES, AND THAT IT CAN ONLY DO IN A BIPARTISAN WAY.

Summary_of_Economic_Financial_Data_July_2019

MPC Press Release-July 2019

2019-Mid-Year-Budget-Statement

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