BoG Governoe Dr Ernest Addison — BoG Governor, Dr Ernest Addison

Economic activity highest since December 2019

On March 23, 2021, 9:00 AM

The economy has bounced back to positive growth, with economic activity climbing to pre-COVID-19 levels, the central bank has revealed.

This Bank of Ghana (BoG) updated Composite Index of Economic Activity (CIEA) recorded an annual growth of 13.9 per cent in January 2021.

The latest figure is the highest since December 2019, compared to 3.4 per cent in the corresponding period of 2020.

The key drivers of economic activity were construction, imports, industrial consumption of electricity, domestic VAT, passenger arrivals at the airport, and port activity.

The apex bank revealed this as it held the Monetary Policy Rate (MPR) for the sixth consecutive time at 14.5 per cent on Monday, March 22 2021.

What is CIEA?

According to the Monetary Policy Analysis Division of the BoG, the CIEA tracks the Gross Domestic Product (GDP) very closely and is taken by the BoG as an excellent business confidence indicator.

It contains several indicators assigned with figures, and the weighted average is computed. So, when the CIEA index increases, it means the economy is expanding and vice-versa.

Besides the GDP, which is released periodically by the Ghana Statistical Service (GSS), the Bank of Ghana (BoG) also uses the (CIEA) to guide the Bank’s Monetary Policy Committee.

The index includes cement sales, Social Security and National Insurance Trust (SNNIT) contribution by the private sector, industrial consumption of electricity, domestic tax, imports, exports, port activity and tourist arrivals.

The Head of Research Department of the BoG, Mr Philip Abradu-Otoo, explained to theghanareport.com that retail sales and domestic VAT collection indicate transactions involving goods and services.

Similarly, cement sale is an indicator of manufacturing activities.

Furthermore, private sector contributions show job losses in the private sector, and job adverts indicate people seeking employment.

Consumer and business sentiments

The central bank added that its latest confidence surveys conducted in February 2021 showed some softening of consumer and business sentiments.

The softening of consumer confidence reflected heightened concerns about the potential re-imposition of restrictions following the upsurge in COVID-19 cases in the first two months of the year, BoG noted.

Similarly, business sentiments about the general economic situation also deteriorated on concerns that the re-imposition of restrictions would further have detrimental consequences on attaining their short-term goals.

“However, with the commencement of the vaccine roll out and gradual lifting of remaining restrictions, the expectation is for both business and consumer confidence to rebound,” the BoG forecasted.

2021 and beyond

Ghana goes into 2021 confronted with a fragile economy with alarming debt levels of GHC 291billion, an increase of 138% over the last four years.

The government is targeting a GDP growth rate of 5 per cent.

The Akufo-Addo administration wishes to cement its economic recovery efforts by continuing the GhanaCare “Obaatanpa” initiative, a GHS100 billion programme to be implemented in three and half years to mitigate the impact of the pandemic, return the country to a sustained path of robust growth and to create a stronger, more resilient and transformed economy.

The government aims to spend GHS113.8 billion to achieve these three targets in 2021.

The expenditure for 2021 is also 13 per cent higher than the GHȻ 98.1 billion approved by parliament for 2020.

The 2021 Budget proposes at least six taxes and levies which forms additional alternatives to raise a revenue of GHS72.5 billion.

The deficit of GHȻ 39.2 is expected projected at -9.0 of GDP, which exceeds the 5percent deficit cap permitted under the Fiscal Responsibility Act.