Ghana Economy - Week ending August 19, 2005

The Ghana economy continues to be interesting. Inflation for July 2005 dropped to 14.9% from 15.7% in June this year. The Monetary Policy Committee of the Central Bank had earlier in the month retained its policy prime rate at 16.5%. This reverts the situation last month when the benchmark 91 day treasury bill rate slipped below the inflation rate bringing about negative real rates of return. Although the Tbill rate has dropped again this week (from 15.37% last week to 15.21% this week), real return rate has moved back into the positive as inflation has dropped to 14.9%.

Petrol prices increased a fortnight ago in response to the unyielding climb of world crude prices. However the increase of 1.7% for petrol and 3.4% for Diesel gas oil are unlikely to significantly move up inflation. Strategically, kerosene and liquefied petroleum gas (LPG) prices have been decreased by 8.3% and 9.3% respectively.

I believe the MPC will be very cautious in changing the prime rate in response to the decreasing inflationary pressure, especially with the back drop of volatile and up climbing crude oil prices.

On the other side of the financial markets, the bearish tendency of the GSE where stock prices have seen significant drops this year, looks to turn around. Perhaps the shift to daily trading has sparked off a marginal upward shift in liquidity and the index is looks likely to pick up accordingly. Some companies such as CFAO and Unilever have shown impressive half year results and should see interesting share price movements.