Ghana’s economy shows signs of recovery

Ghana’s economy now looks poised to shrug off hiccups that characterized the first two quarters of the year, indicating the worst may be over for the country’s version of the global crises.

The past few weeks have seen the country making significant progress in a number of critical economic sectors, with key macro-economic indicators also pointing to the right direction.

At the foreign exchange front, businesses have begun taking a sigh of relief as the domestic currency has seen some stability in the past three weeks.

Even though the cedi had depreciated sharply to a cumulative 19.5%, 29.5% and 19.2% to the dollar, pound and euro as at June 30, 2009, the free-fall appears to have stalled since the third quarter.

The Ghanaian cedi in the immediate past week recovered by 0.42% to the Dollar and 1.84% to the Pound. Seasoned currency market analysts speculate this might be the start of a fall in demand pressure on the cedi’s major trading counterparts as an investment option, resulting in a further strengthening of the local currency.

The IMF’s promise of setting aside over $1.1 billion for Ghana, including a $600 million loan over three years and $452 million in special drawing rights, and information of the fact that inflows from multilateral and bilateral sources would not be affected this year by the global situation, are expected to boost confidence henceforth.

The past two trading weeks also witnessed a significant change in market activity on the local stock exchange. Last week ended with a 44.58 point appreciation in the market indicator, following the previous week’s all-week rise in the index. Year-to-date change in the GSE All-Share Index is now down to -49.62 slump, after crossing the -50 mark.

The Ghana Statistical Service in its latest release reported inflation for July fell slightly to 20.50% on decline in food inflation, and projects a further drop, all things being equal, based on past trend analysis.

This is against the backdrop of a predicted bumper harvest for cereals this year, ensuring a calming on inflation tendencies from the food and non-alcoholic beverages group that accounts for 49% of the Consumer Price Index (CPI) for the remaining months in the year.

The Institute of Statistical, Social and Economic Research (ISSER) has confirmed the observation that there has generally been marked improvement in the macro-economic situation in the second half of the year.

In a review of the economic performance for the first half of 2009, Dr Charles Ackah, Research Fellow at ISSER, attributed the progress achieved thus far to government’s commitment to implementing its 2009 budget strategy that hinged on aligning government spending with revenue.

According to him, government has achieve about 84% percent success as it has been able to cut expenditure significantly and recorded some improvement in domestic revenue generation.

Dr Wampah, Deputy Governor of the Bank of Ghana who was present at the launch of ISSER’s ‘2008 State of the Economy Report’ explained that government was doing all in its power to turn around the economic fortunes of the country, saying that “improvement in the performance of the domestic currency on the foreign exchange market is proof that our efforts are yielding results”.

A number of prominent social commentators have attributed the marked improvement in the country’s economic situation in recent weeks to the commencement of government’s economic management duty, after putting together his team.

There are others who are opined that the improvement in the local economy has resulted from an improving global situation.
Unexpectedly growth in France and Germany in the second quarter of the year has raised hopes for broader European recovery.German’s gross domestic product rose by 0.3% in the second quarter, bringing an end to the country's deepest recession since World War II, boosting hopes of recovery in the broader euro zoneFrance’s GDP also grew by 0.3% in the second quarter.
And for the first time since August 2008 the Federal Reserve's statement had not characterized the US economy as contracting, weakening, or slowing. Federal Reserve Chairman Ben S. Bernanke last week noted that the global economy is beginning to emerge from recession after “aggressive” action by central banks and governments.
On the return to IMF for support, Dr Ackah said it was a prudent decision under the current circumstance, but called on government to put pressure on the institution to review its modalities it has employed since the 1980’s, demanding cut backs that ultimately affect the poor.


(Charles Amoah)