BoG’s CIEA index falls by 7.6%
Ghana’s economy suffered a significant contraction in economic activity in January 2023, according to the Bank’s Composite Index of Economic Activity (CIEA).
The index fell by 7.6 percent compared to the same period in the previous year, with port activity, cement sales, imports, and credit to the private sector being the main indicators that weighed down the index. This contraction in real sector activity is a cause for concern, particularly as it follows a growth rate of 4.2 percent in the same period of 2022.
However, it is not all doom and gloom for Ghana’s economy, as both business and consumer sentiment improved in February 2023. Consumer confidence improved due to easing inflationary pressures, which led to some optimism about future economic conditions.
Meanwhile, business sentiment improved as companies met short-term targets amid positive company and industry prospects. The survey findings were consistent with observed trends in Ghana’s PMI for February 2023, which rose above the benchmark level of 50 for the first time since January 2022.
While the improvement in sentiment is certainly positive, it remains to be seen whether this will translate into sustained economic growth in the coming months. Factors such as fiscal and monetary policy, as well as external factors such as global commodity prices and the COVID-19 pandemic, will play a crucial role in determining the trajectory of Ghana’s economy.
Indeed, as the IMF noted in its latest report on Ghana, the country’s economic recovery is dependent on continued efforts to contain the pandemic and ensure macroeconomic stability.
Against this backdrop, the government’s policies and actions will be closely scrutinized by investors and analysts alike. Ghana has made progress in recent years in improving its business environment and attracting foreign investment, but the current economic challenges will require a concerted effort to address.
For example, policies aimed at boosting infrastructure investment and promoting export diversification could help to mitigate the impact of external shocks and support long-term growth.
While Ghana’s recent economic contraction is a cause for concern, there are some positive signs of improvement in sentiment. It will be important to continue monitoring economic indicators and policy developments in the coming months to assess whether this improvement is sustained and whether it translates into meaningful economic growth.
