Imports, credit to private sector, port activity weigh down CIEA as it contracts by 6.4%

The Bank of Ghana has revealed that the country’s Composite Index of Economic Activity (CIEA) contracted by 6.4 percent in March 2023. While this contraction marks an improvement compared to the previous month’s decline of 7.2 percent, it is a notable downturn when compared to the growth rate of 4.6 percent recorded in March 2022. The decline in the CIEA was primarily driven by several key indicators, including imports, cement sales, credit to the private sector, and port activity. However, amidst these challenges, there were positive developments in domestic VAT collections, industrial consumption of electricity, and tourist arrivals during the review period.

Speaking at the 112th Monetary Policy Committee (MPC) press briefing, Governor Dr. Ernest Addison highlighted the Bank’s latest confidence surveys conducted in April 2023, which showed a further improvement in sentiments. Notably, consumer confidence experienced a boost due to the easing of inflationary pressures. This positive development instilled optimism among consumers regarding the future economic conditions of the country. Furthermore, businesses reported meeting their short-term company targets and expressed positive sentiments about both their individual prospects and the industry as a whole. These positive sentiments were attributed to improving consumer demand and relative stability in the local currency.

The findings from the survey align with the observed trends in Ghana’s Purchasing Managers’ Index (PMI) for April 2023. The PMI, which measures business conditions, indicated a continuous improvement for the third consecutive month. This positive momentum further bolsters the notion of a gradual recovery in the Ghanaian economy.

However, despite these positive indicators, Ghana still faces several challenges that need to be addressed. The decline in imports reflects a broader economic slowdown, highlighting potential weaknesses in external trade. Similarly, the contraction in cement sales and reduced credit to the private sector suggest a subdued investment environment, which could hamper economic growth in the medium term. The decline in port activity further underscores the impact of global trade disruptions and supply chain constraints on the country’s economic performance.

On the other hand, the improvement in domestic VAT collections is a positive signal, indicating an increase in consumer spending and economic activity. This growth in industrial consumption of electricity and tourist arrivals also bodes well for the respective sectors, showcasing the resilience and potential for recovery in these areas.

Looking ahead, policymakers and market participants will closely monitor these indicators to gauge the trajectory of Ghana’s economic recovery. The central bank will continue to implement measures aimed at fostering stability, including monetary policy adjustments and support for key sectors. Additionally, ongoing efforts to improve the business environment, enhance trade facilitation, and attract investment will play a crucial role in revitalizing economic growth.

While the signs of recovery and improved sentiments are encouraging, it is essential to remain cautious and monitor the evolving global and domestic economic landscape. External factors such as commodity prices, exchange rates, and geopolitical developments can significantly influence Ghana’s economic outlook. Consequently, a comprehensive and coordinated approach encompassing fiscal policies, structural reforms, and targeted interventions will be vital to ensure sustained and inclusive growth for the Ghanaian economy.

Ghana’s Composite Index of Economic Activity (CIEA) has shown signs of recovery, albeit with lingering challenges. The improved consumer confidence and positive sentiments expressed by businesses provide a glimmer of hope for the future. However, addressing the underlying structural issues and promoting a conducive business environment will be crucial to unlock the full potential of Ghana’s economy and pave the way for sustainable growth in the years to come.