True State of economy to be known on Monday

The true state of the Ghanaian economy would be known when the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) announces its findings on Monday March 21, 2016 after a review of the economy.

The MPC meets tomorrow to review developments in the economy in the last two and half months and to make projections for the next three months.

The Committee will inform Ghanaians about the fiscal performance of the economy with regard to budget deficit, revenue performance, interest rates and balance of payment.

Economists are keen on hearing from the Governor, Dr Henry Wampah, Ghana’s present debt levels as he failed to provide the information at the last press briefing in February this year.

Key performance indicators such as business confidence and rate of economic growth will also be measured.

Already, inflation has subsided by 0.5 percentage points to 18.5 percent in February signaling a stable price development. The reduction was attributed to a stable currency.

The MPC maintained the Policy Rate at 26 percent the last time it reviewed the Ghanaian economy.

It noted that “despite the unanticipated adjustment in petroleum prices and its possible pass through effects, our inflation forecast horizon remains broadly unchanged for the delivery of the medium term target of 8±2 percent in early 2017, barring any further unanticipated shocks.”

It therefore concluded that the current tight monetary policy stance, supported by continued fiscal consolidation and improvement in the energy situation, would provide the necessary impetus to control inflationary pressures.

But analysts are expecting an unchanged policy rate for now to enable the economy consolidate the relative stability.

Economist and Financial Analyst, Dr John Gatsi believes the Central Bank must not increase the policy rate but rather maintain or reduce its slightly to consolidate the gains chalked so far.

“We have reached a threshold that we cannot increase the policy rate. I think the policy rate must be maintained or reduced slightly to stimulate economic activities.”

Economist Dr Ebo Turckson, has called on the MPC to reduce the monetary policy rate.

According to him, the current inflationary trends and a stable currency should be reasons for the MPC to reduce the policy rate.

Since the last MPC meeting, the foreign exchange market has been relatively stable, supported by the tight monetary and fiscal policy stance and inflows from donors.

Dr Turckson said the BoG must consider reducing the rate to reduce high interest rate. “The currency has stabilized, inflation has toned down, so we should expect them to slightly reduce the rate. This is because of the fact that the rate itself when it’s changed, also fuels expectations on the interest rate,

“But even though when the rate changes sometimes we do not see a corresponding change in the lending rate immediately in this country, let’s see what the MPC will do this time. But we expect them to bring down the rate so as to bring down the lending rate which hovers around 30 to 40 percent.” Dr Ebo Turckson noted.