Cedi volatility dampens hopes of businesses

Business entities say they are less optimistic about the prospects of the economy primarily because of the unpredictability of the value of the cedi against the other major trading currencies, the Bank of Ghana has noted.

The dip in business confidence as found in a latest periodic survey of the central bank affirms an earlier findings by the Association of Ghana industries- the umbrella organization of businesses in the country, which picked up similar sentiments among member institutions.

According to the central bank’s overall business confidence index, business confidence dipped by 10.4 points to 88.8 in the latest survey conducted to ascertain business confidence for the first three months of the year.

The Bank of Ghana is preparing to begin the next survey to gauge business confidence in the economy as the first half of the year comes to a close today.

But the results of the latest business confidence index paint a gloomy picture for a country undergoing austere measures exacerbated by the slide in the cedi in the currency market.

The Bank of Ghana noted: “Businesses were concerned about the volatile exchange rate depreciation, industrial and company prospects as well as prospects for growth.”

The sentiment of businesses contrasts sharply with that of consumers who are optimistic about the economy as the first four months of the year indicates a surge in consumer confidence to portray mixed sentiments in the economy.

The consumer confidence improved marginally to 91.2 in April 2015 from 89.9 in January.

“While consumers were measured in their optimism about the prospects of the economy, businesses were less optimistic about prospects of the economy,” the central bank said.

The central bank has moved to address the depreciating currency by injecting US$20 million a day into the economy in a bid to improve confidence in the economy.

Since January this year, the cedi has tumbled by more than 20 per cent. In 2014, it depreciated 31 per cent.The troubles with the cedi add to a myriad of challenges facing businesses who are even unsure when the debilitating power crisis that competes for the topmost hurdles confronting them will be resolved.

This has led to several thousands of people losing their jobs as businesses strategies to cut losses and production output.