Consumer Confidence Dips

Consumer confidence declined for the first month of this year though business confidence improved during the period.

According to the latest Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) report released on Friday, the reduction in consumer confidence was mainly due to the impact of the recent increase in fuel prices.

The 30 percent increase in fuel prices translated into increases in transport fares between 15 and 25 percent. However, optimism about general economic prospects, realization of expectations and companies’ prospects contributed significantly to the positive assessment of business.

In year-on-year terms, the Bank of Ghana Composite Index of Economic Activity (CIEA) registered a growth of 10.5 percent in 2010 compared to 9.6 per cent in 2009, Paa Kwesi Amissah Arthur, Governor said.

Explaining further, the Chairman of the MPC said some of the factors that contributed to the increase in the index relative to the pace observed a year ago were commercial Banks’ Credit to the private sector, Industrial activity, level of imports and construction sector activity. Others were tourist arrivals, social security contribution, sales of key manufacturing establishments and port and harbour activity.

Meanwhile, the Central Bank said it will remain cautious about the outlook of the Ghanaian economy, notwithstanding improvements in the macro-economic fundamentals in the past year.

The Central Bank maintained its Monetary Policy Rate in order to check inflation and keep the economy on track. “Given the balance of risks in the economy’s outlook and the need to be cautious and sensitive to emerging global trends, the MPC, which reviewed developments in the economy and made projections for the next quarter, decided to maintain its Policy Rate at 13.5 percent,” Paa Kwesi Amissah Arthur, Governor of the Bank of Ghana said.

Some of the factors taken into consideration included revenue mobilization which remained relatively strong, improvement in economic activity, improved fiscal situation and developments in energy and food prices as well as the geo-political developments in North Africa and the Middle East.

The Governor said there was no cause for alarm and gave the assurance that the Central Bank will continue to address short-term fluctuations to minimize the disruptive effects of investment inflows.

“The long-term sustainability, export competitiveness, stable reserve accumulation and minimizing speculative flows will guide the management of the foreign exchange market.” Explaining further, he said, “Going back to the issue of the recent developments in the foreign exchange market, it is important to recall that Ghana has become an attractive investment destination for portfolio investments with higher domestic interest rates and the prospects of currency appreciation due to expected receipts of petroleum revenues.

On government’s fiscal operations, preliminary data on the implementation of the 2010 budget revealed that government budget operations ended with a deficit of GH¢1.7 billion (3.7 percent of GDP) compared to a target of GH¢1.3 billion (2.9 percent of GDP.

Total expenditure for 2010 was GH¢8.8 billion (19.7 percent of rebased GDP), 1.3 percent above the target of GH¢8.3 billion.

With regard to the external sector, total exports for 2010 were estimated at $7.9 billion, a 35.2 percent increase over the 2009 level. Exports of cocoa beans and products grew by 15.5 percent to $2.2 billion, while gold exports increased by 40.7 percent from $1.2 billion to $1.7 billion. Similarly, total imports for last year amounted to $10.7 billion, 33 percent higher than that of 2009.

Oil imports accounted for $2 billion, 35 percent above the 2009 figure while capital and intermediate goods accounted for 77.1 percent of total imports in 2010, as against 73.7 percent recorded in 2009.

The current account deficit however increased to $2.6 billion compared to a deficit of $1.6 billion recorded in 2009.

As a result of the improvement in the balance of payments, gross international reserves increased by $1.6 billion to $4.7 billion at the end of December 2010. Gross international reserves subsequently increased to $4.8 billion in January 2010, representing 3.8 months of import cover for goods and services.