We’ve Made Notable Improvements

– In macroeconomic conditions – BoG Governor

Story: By Isaac AIDOO, Accra

GHANA has made significant improvements in its macroeconomic indicators, Governor of the Bank of Ghana (BoG), Dr. Ernest Addison has stated, crediting the country’s recent economic progress to the mining sector, particularly gold, and government-led construction projects.

“This is a positive message, and it is important that the public understands the progress we are making. The economy is on a solid path, and the outlook remains strong as we move into the rest of the year,” Dr. Addison maintained as he addressed journalists during the latest Monetary Policy Committee (MPC) press conference last Friday.

Dr. Addison emphasized that the current economic expansion was not driven by temporary factors, but by real economic activities, specifically the BoG’s domestic gold purchasing programme and sustained government spending on infrastructure.

According to data from the Ghana Statistical Service (GSS), the industrial sector has been the primary engine of economic growth, with mining playing a pivotal role. Dr. Addison explained, “If you look at the data, the growth was driven by industry, and within industry, it was largely the mining sector that led the way.

“Drilling down further, you will see that this growth was mainly driven by gold purchases linked to the central bank’s domestic gold purchasing programme,” he added.

The programme, launched by the BoG, has been instrumental in bolstering gold reserves while providing a significant boost to the local mining sector. The Governor highlighted that this initiative has strongly contributed to the overall economic growth witnessed in recent quarters.

“This growth is not based on mere effects but on real economic activity, driven by central bank gold purchases,” Dr. Addison remarked, underscoring the tangible impact of the initiative on the economy.

In addition to the mining sector, the Governor pointed out that construction was the second-largest contributor to growth in the industrial sector, with government expenditure on infrastructure projects remaining robust.

“The construction sector recorded the second-highest growth in the numbers released by the GSS, and we expect these activities to continue through the rest of the year,” Dr. Addison added, projecting continued momentum in the construction industry.

Improved Macroeconomic Conditions

Dr. Addison stressed that Ghana’s overall macroeconomic conditions have improved significantly, pointing to a broad-based recovery across various sectors. “The message is clear: this economy is doing very well,” he said.

“From 2017 to 2022, the cedi moved from four to six cedis to the dollar. Even after COVID-19, the exchange rate remained at six cedis. It was only in 2022 that we saw the significant depreciation, where the rate moved from six to 15 cedis. However, we are recovering quickly, and the exchange rate has stabilized.”

This recovery, according to the Governor, reflects the effectiveness of the policies implemented by the Bank of Ghana and the government. He expressed satisfaction with the work of the MPC, stating, “I am quite happy with the record of this Monetary Policy Committee and the work we have done so far.”

External and Domestic Factors Supporting Growth

On the international front, Dr. Addison noted that the external environment has improved, with global economic activity remaining resilient in the second quarter of 2024.

Declining oil prices, coupled with easing inflation in major advanced economies, have created favourable conditions for domestic growth. “Global economic conditions are supportive of growth, and these external improvements complement our domestic recovery,” he said.

Domestically, Ghana’s economy continues to show signs of recovery, as evidenced by stronger-than-expected GDP growth in the second quarter of the year. The Governor highlighted that the second half of 2024 is expected to maintain this momentum, driven by sustained construction activity, increased household and business consumption, and strong exports, particularly of gold and crude oil.

Additionally, banks have extended credit to the private sector, further supporting economic activity.

Balance of Payments and Fiscal Outlook

Dr. Addison also addressed improvements in Ghana’s external payment position, which has benefited from higher trade surpluses and strong reserves. The Governor noted that robust growth in gold exports has been a key factor in improving the trade surplus, complemented by external financial inflows from the International Monetary Fund (IMF) and the World Bank.

“These factors have helped to strengthen our balance of payments, and we are on track to achieve a surplus by the end of 2024,” he noted.

Looking ahead, the balance of payments is expected to further improve, driven by increased exports, stronger remittances, and reduced government external payments.

“The outlook remains positive, and we anticipate a stronger external position by year-end,”  Dr. Addison stated.

Inflation and Monetary Policy Adjustments

Touching on inflation, Dr. Addison said that the disinflation process is well underway, with headline inflation having declined for five consecutive months. Core inflation, which excludes volatile items, has also seen a sharp decline over the same period.

“Inflation is projected to continue easing toward the target range of 13-17% by the end of 2024, and barring any unanticipated shocks, it should track back toward the medium-term target of 6-10% by the end of 2025,” he said.

As part of its efforts to support this process, the MPC recently lowered the Monetary Policy Rate by 200 basis points to 27.0%, signalling confidence in the continued improvement of macroeconomic conditions. Dr. Addison explained that this adjustment aims to balance the need for continued disinflation with support for ongoing growth.

Conclusion: A Positive Growth Story

In closing, Dr. Addison reiterated the positive outlook for Ghana’s economy, stating that the nation’s growth is underpinned by real economic activity, driven by strategic initiatives such as the central bank’s gold purchasing program and government-led construction projects. He called on the media to accurately report on the developments within the economy, emphasizing that Ghana’s macroeconomic conditions have significantly improved and are poised for further growth in the coming months.