New data indicates Q4 2020 economic rebound

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New data released by the Bank of Ghana suggests that Ghana’s economy may have begun a rebound from the contractions it suffered during the second and third quarters of 2020 as a result of the adverse impact of COVID-19 and the requisite socio-economic restrictions imposed by government to curb the spread of infection.

The central bank’s Composite Index of Economic Activity grew strongly during the last quarter of 2020 and although the usual close correlation between the CIEA and Gross Domestic Product measurements conducted by the Ghana Statistical Service have loosened somewhat since the advent of the coronavirus pandemic, the sheer strength of the CIEA’s rise suggests that Ghana enjoyed a resumption of economic growth during the period.

However, the resurgence of COVID-19 and the requisite re-imposed restrictions threatens to be a dampener, on both economic activity and the underlying business and consumer confidence that drives it, although Ghana’s financial markets are showing defiance – interest rates continue to fall despite the BoG putting further monetary easing on hold for now; forward foreign exchange auctions conducted fortnightly by the central bank indicate confidence by forex users and their bankers that the cedi’s exchange rate will continue to hold steady at least over the next two months; and equities listed on the Ghana Stock Exchange have started enjoying a price surge after an unprecedented three consecutive years of bearish sentiment which have left many stocks fundamentally undervalued.

According to the latest BoG surveys “consumer confidence has remained firm at pre-lock down levels, reflecting optimism about current economic conditions following the gradual lifting of COVID-related restrictions.”

The snag is that this survey was conducted before restrictions started being re-introduced and their re-introduction will push consumer sentiment in the other direction, a trend which will reflect in the next survey, the results of which will not be announced until late March, even though the sentiments are already in play now.

The latest BoG survey on business confidence also reveals that it has “increased significantly, reaching pre-lock down levels for the first time as businesses meet their short term company targets and have expressed positive sentiments about growth prospects.”

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