Ghana’s growth to remain stable -Standard Bank report

Ghana’s growth is predicted to remain stable in 2018 and 2019 on the back of strong oil sector growth, the Standard Bank African Market Reveal Report has said.

The report for May for 2018 and copied to the Times Business in Accra yesterday indicated that the above-average growth in the industrial non-oil economy and progress in public finance management would sustain the growth of the Ghanaian economy.

“Standard Bank expects growth at a brisk 7.0 per cent year-on-year in both 2018 and 2019 due mainly to strong oil-sector growth. The industrial non-oil economy is also set to deliver above-average growth over the next three years due to structural reforms in the financial and power sectors,” it said.

The report explained that the steady progress made in public finance management should improve tax revenue collection and increase infrastructure spending by government.

It, however, indicated that private sector credit growth declined in the period under review because of a defensive posture taken by banks in the wake of the new minimum capital requirement by the Bank of Ghana (BoG).

“Private sector credit growth (PSC) reached only 13.8% year-one-year in February from 17.5% year-on-year twelve months prior. Changes to capital requirements in the banking sector may have forced commercial banks to adopt a defensive posture towards credit extension,” it said.

The BoG has mandated all banks to increase the minimum capital requirement to GHȻ400million by year-end from GHȻ120million currently.”

The report further opined that for the banking sector to remain fully compliant to the new minimum capital requirement, the sector needed a capital injection of between USD800 million and USD1 billion.

“We estimate that the entire sector needs a capital injection of USD800million to USD1.0billion to become fully compliant. There is a strong possibility that this new requirement will trigger consolidation in the sector. Once the new requirements have been complied with, we expect credit growth to rise meaningfully, thus potentially boosting economic growth,” the report said.

It said the changes to minimum capital for banks would better position most banks financially to provide credit to the private sector.

The African Markets Reveal is a monthly report issued by the Standard Bank Group, parent company of Stanbic Bank Ghana and focuses on the economic and financial outlook of African countries.

The report also reviews current economic situations and makes short to medium-term predictions about the economies of African countries.

By Times Reporter

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