The Bank of Ghana (BoG) has observed a deceleration in disinflation, with headline inflation rising from 20.4% in August 2024 to 22.1% in October 2024. The BoG’s Monetary Policy Committee (MPC) attributes this upward trend mainly to escalating food prices and exchange rate pass-through effects from earlier currency depreciations. Despite the month-to-month increase, October’s inflation rate represents a significant reduction from the 35.1% experienced in October 2023, illustrating an overall easing in inflationary pressures. In a recent press statement, the BoG emphasized the need to acknowledge these factors influencing inflation while highlighting improvements in the domestic economy, including sustained growth in economic activity and stabilized macroeconomic conditions.
In assessing global economic trends, the MPC noted that although global growth remains robust, it has been supported by an ongoing disinflation process amidst easing policies from major central banks in advanced economies. Economic performance, particularly within the services sector, has remained strong, while the manufacturing sector faces challenges due to geopolitical tensions. With predictions of steady global growth of 3.2% for both 2024 and 2025, potential risks such as persistent geopolitical tensions and trade protection measures could impact this outlook. Meanwhile, decreasing global inflation, influenced by lower energy prices and softening wage growth, provides a more favorable environment for policy adjustments.
Domestically, the Bank’s indicators indicate a positive trajectory for economic activity, with the real Composite Index of Economic Activity (CIEA) recording a 2.2% annual growth in September 2024, up from a decline the previous year. Key drivers of this growth include enhanced port activity, increased consumption, construction activities, and an upswing in tourist arrivals. Consumer confidence remains steady, while business sentiment shows marked improvement, reflected in the upswing of Ghana’s Purchasing Managers’ Index (PMI). However, recent inflation trends suggest rising pressures, largely attributed to surging food prices and depreciation-related effects on currency, necessitating careful monitoring of emerging price dynamics.
Interest rates have generally trended downward, with Treasury bill rates in October 2024 declining significantly compared to previous years, indicating a successful transmission of the BoG’s monetary policy efforts. Additionally, the performance of the Ghana Stock Exchange has improved, benefiting from enhanced macroeconomic conditions and increased investor confidence. As of October 2024, the market capitalization showed significant growth, primarily driven by sectors such as mining, IT, and finance. The banking sector, though still facing challenges with non-performing loans, exhibits sound capital positions and improved liquidity, attributing its resilience to robust asset growth and adherence to account recapitalization and credit risk management strategies.
The external sector has also seen commendable improvements, with a current account surplus of $2.2 billion in the first nine months of 2024, a marked increase from the previous year. This surplus is underpinned by higher export revenues and steady remittance inflows, contributing to substantial reserve accumulation. The Ghana cedi showed appreciable gains against major currencies, further reflecting improved conditions in the foreign exchange market. Observations reveal that the currency’s position has become more favorable, bolstered by recent increases in external reserves, creating a solid foundation for future economic stability and trade engagement.
Looking ahead, the BoG anticipates challenges from global conditions that may impact its economic stability. Ongoing inflationary pressures, particularly from food prices and exchange rate effects, suggest that attaining the target inflation rate now extends to late 2025, necessitating careful policy calibration. While the financial landscape demonstrates resilience and the implementation of the IMF-ECF Program proceeds optimally, the BoG’s MPC has decided to maintain the Monetary Policy Rate at 27%, considering current economic indicators and dynamics. The upcoming MPC meeting in January 2025 is likely to provide further insights into the macroeconomic outlook and necessary policy adjustments.
