The Bank’s Real Composite Index of Economic Activity (CIEA) for September 2015 indicates a slower pace of growth compared with the same period in 2014, Dr. Henry Kofi Wampah, Governor, Bank of Ghana (BoG) has said.
Speaking at a news conference in Accra to announce the BoG policy rate he however, stated that in the medium term, growth conditions were expected to recover, supported by a turnaround in the energy situation, increased production of oil and gas and a general improvement in the macroeconomic environment as inflation starts trending down.
The policy rate has been increased from 25 per cent to 26 percent in an effort to control inflation and depreciation of the cedi.
“Fiscal consolidation remains on track. For the first nine months of the year the overall budget balance registered a cash deficit of 5.1 per cent of GDP which is within the programme target of 5.7 per cent,” he said.
Dr. Wampah said maintaining the fiscal consolidation efforts would complement the tight monetary policy stance for the attainment of the medium term inflation target.
This he said, would in turn, help create conditions for long term sustainable growth.
He said risks from the global environment have heightened, driven mainly by slower growth prospects in China and other emerging market economies.
Also, he said commodity prices continue to decline amidst tightening financial conditions.
“These have resulted in increased depreciation of currencies ranging from 19 per cent to about 48 per cent year-to-date in most commodity exporting countries. The transmission of these risks presents clear threats to the balance of payments outlook,” he said.
The Governor said for the first ten months of 2015, the overall balance of payments position, as measured by the change in net international reserves, worsened to a deficit of US$378 million, compared with a surplus of US$181.6 million for the corresponding period of 2014.
At the end of October 2015, gross foreign assets stood at US$5.7 billion (3.4 months of imports). The current account balance for the first nine months recorded a deficit equivalent to 5.4 per cent of Gross Domestic Product.
He noted that overall the risks to the inflation outlook were on the upside, with a likelihood of a further drift away from the medium term target, hence its decision on the monetary policy rate.
He said the committee would continue to monitor developments in the economy and take appropriate action if necessary, including the possibility of lowering the policy rate once inflation expectations are well-anchored.