Dr Maxwell Opoku-Afari, First Deputy Governor of BoG

Contrary to fears that Ghana’s economy will take some time before it bounces back, statistics available to the Bank of Ghana (BoG) suggest that the economy is on its way to fast recovery.

First Deputy Governor of the Central Bank Dr. Maxwell Opoku-Afari gave indication that the economy will begin to recover faster than expected as the country experiences significant decreases in COVID-19 cases due to effective management of the pandemic.

The country had 46,694 COVID-19 cases with 45,945 recoveries, 301 deaths, leaving only 448 active cases as a result of the measures put in place by government to fight the virus.

As a result of the pandemic, Ghana’s economy was projected to contract from about 6.4 percent in 2019 to 0.9 percent GDP at the end of 2020 because of the negative impact of the deadly disease globally.

However, latest projections indicate that the country’s economy may grow better than estimated, at a figure of over 2 percent GDP.

The economy contracted by 3.2 percent this year against the 5.7 percent recorded in the same period last year as a result of the novel coronavirus pandemic.

The virus which led to a three-week lockdown of major parts of the country in March forced many businesses to close.

Providing an update on the country’s economy on Accra-based Mx24 TV, the First Deputy BoG Governor, Dr. Opoku-Afari expressed optimism that despite the contraction, the economy is beginning to pick up.

“This recovery is quite significant to the extent that we think that growth will be positive in the third quarter. If you put it that way, then the leading indicators is pointing to what we will call a V-shaped recovery because of the significant negative impact we expected as a result of the lockdown as we expected the restrictions to be prolonged but we saw that there was a gradual lifting of those restrictions.

“This meant that the impact on economic activities had not been as severe even though it is a contraction because -3.2 is not a small contraction but to have a turnaround in the third quarter shows that the recovery is going to be more of a V-shape than a U or a trapezoid,” he added.

According to Dr. Opoku-Afari, even though the country experienced the contraction in economic activities in the second quarter of the year, the Composite Index of Economic Activity (CIEA) shows significant recovery in the third quarter.

“What we have seen at the Central Bank and one of the advantages we have is to have access to what we call High Frequency Leading Indicators. Putting all those High-Frequency Leading Indicators together, we have been able to put together what we call the Composite Index of Economic Activity which helps us track short-term dynamics in economic activities and gives us a sense of where economic activity is going to.

“Even though we saw a contraction in the second quarter, the data that we are picking from the Composite Index Economic Activity and High-Frequency data including credit to the private sector, manufacturing, sales, and a few other things shows that we are beginning to see some significant recovery already in the first few months of the third quarter up to September and in fact throughout the third quarter,” he noted.

Cedi performance

Dr. Opoku-Afari has argued that the BoG and the Ministry of Finance should be commended for the relative stability of the Ghana’s Cedi in the last three-and-half years.

According to him, reforms in fiscal and monetary measures by these two institutions are responsible.

Over the period, the performance of the Ghana cedi against the US dollar has been topical amongst economist as well as political actors.

Out of some 15 key currencies on the continent, the cedi remained relatively stable going down by only negative 2.86 percent from January 2020 till now.

“We entered 2020 with a very solid foundation in terms of gross international reserves accumulation. We ended 2019 with about $8.4 billion in terms of gross reserves which was about 4 months of import cover and that is the highest we have ever had which shows that we have enough cushion to be able to stand any external vulnerabilities. If you look at previous years, most of the time the currency moves a lot in the first five months of the year but this time we entered the year with this solid level of gross international reserves”, he added.

Other factors

Commenting on other factors that have contributed to the stability of the cedi, he noted the $3 billion Eurobond from the capital market and the $1 billion advanced to the country by the International Monetary Fund (IMF) are part of the success story.

“On top of that, through proper timing and a wind of chance, we happen to go to the Eurobond market just before the pandemic hit and got in $3 billion to add to the gross international reserves that have built up. In addition, when the pandemic hit, Ghana accessed $ 1 billion from the International Monetary Fund as part of the Rapid Credit Facility (RCF) to address the COVID.

“So when you put all these together, it positions the Central Bank to be able to have enough reserves to be able to support the currency going forward. That is why in the first 4 months of the year, we saw an appreciation of the currency whereas in other similar months in comparable years back, we saw significant depreciation,” he added.