Leading indicators of economic activity during the first quarter of the year suggest a slowdown in the economy, the Bank of Ghana has reported.
The central bank attributed the slowdown to the restrictions, social distancing, and the partial lockdown measures introduced by the government in the middle of March.
Retail sales picked up in March 2020 due to panic buying which preceded the partial lockdown, while consumption, by proxy of Domestic VAT receipts, dipped.
Addressing the 94th Monetary Policy Committee (MPC) press conference, the Governor of BoG, Dr Ernest Adisson, said the slow conditions in economic activity was reflected in port activities and a sharp decline in tourist arrivals.
“The slowdown also affected the private sector’s contributions to social security. As a result of these developments, the Bank of Ghana’s Composite Index of Economic Activity (CIEA) contracted by 2.2 per cent in March 2020, compared to a growth of 5.6 per cent for the corresponding period of 2019,”
“Preliminary estimates by the Bank of Ghana shows that growth in 2020 is likely to be between 2.0 and 2.5 per cent,” he stated.
Decline in currency
He said the lockdown also resulted in a decline in currency as consumers resorted to the use of electronic modes of payment.
“General economic uncertainty reduced demand for credit, as commercial banks tightened their credit stance.
“As a result, credit to the private sector remained virtually flat during the period. Broad money supply (M2+) slowed significantly to 13.5 per cent in March 2020, compared with 21.6 per cent growth a year ago,” he noted.
Coronavirus Alleviation Programme
To help restore economic activities and mitigate the impact of COVID-19 on households, the government recently launched a GH¢1 billion Coronavirus Alleviation Programme (CAP).
The programme, which was subsequently approved by Parliament on April 9, 2020, voted GH¢600 million as soft loans for businesses, especially those in the micro, small and medium enterprises (MSME) sector.
The fund has been categorised in Anidaso and Adom (special) loans, and is expected to provide soft loans at three per cent interest rate to businesses under the MSME space.
Commenting on the programme, the Executive Director of the National Board and Small Scale Industries (NBSSI), Mrs Kosi Yankey Ayeh, said “after deliberation by the President, the Ministry of Finance and the Ministry of Trade and Industry, we decided to keep the interest rates at three per cent to reduce the plight of the MSMEs in this difficult time.
“The moratorium still remains up to one year and during the application process, MSMEs have the option to select a moratorium that will work best for them.
“Repayment of loans also remains two to three years; this was taken into consideration based on MSMEs’ needs assessment,” she noted.