Business sentiments at the end of 2022 showed signs of recovery, leading to increased optimism in the economy – largely on the back of cedi-stability at the time, along with the staff level agreement (SLA) with the International Monetary Fund (IMF).

The Bank of Ghana’s latest survey is consistent with the Ghana Purchasing Managers Index conducted during the same period, which improved to 47.0 percent in December 2022 from 44.9 percent the previous month.

Per the January 2023 summary of economic and financial data, the latest business confidence survey – conducted in December 2022 – shows that the optimism of businesses turned positive and logged at 75.7 percent from a baseline level of 100 percent, following a 5th consecutive decline in business confidence surveys. Notwithstanding, the current survey remains lower compared to the same period of 2021 at 98.4 percent.

Already, currency analysts have identified that the recent consensus between government and key bondholders – the Ghana Association of Bankers (GAB), Ghana Insurers Association (GIA) and Ghana Securities Industry Association (GSIA) – will essentially provide some support for the local currency; awaiting a possible final agreement with the IMF by the end of Q1 2023 to ensure release of the first tranche from the US$3billion IMF deal.

The central bank has observed that business sentiments turned positive due to the achievement of short-term targets and optimism about companies’ and industry prospects – during the last confidence survey in December 2022.

“Business sentiments also turned positive due to the achievement of short-term targets and optimism about company and industry prospects, following the local currency rebounding during the month. The survey findings were broadly aligned with observed trends in Ghana’s Purchasing Managers Index, which improved to 47.0 percent in December 2022 from 44.9 percent in the previous month,” the Bank of Ghana Governor, Dr. Ernest Addison, said at a press briefing following the 110th Monetary Policy Committee (MPC) meeting.

Meanwhile, the latest confidence survey conducted by the Bank in December 2022 pointed to some marginal improvement in sentiments. Consumer confidence improved on the back of recent reductions in ex-pump petroleum prices and transportation fares.

A final agreement with the IMF following the staff-level agreement (SLA) is contingent on the Domestic Debt Exchange Programme and external debt restructuring, which when concluded and the necessary financial commitment is obtained will allow the SLA’s presentation to the IMF Board.

Confidence would further be boosted by a final agreement with the IMF following the SLA, which is contingent on the Domestic Debt Exchange Programme and external debt restructuring.

The IMF final agreement, when reached, will help restore fiscal and debt sustainability and bring down inflation as well as help stabilise the currency.

Economic activity

According to the Bank, domestic growth conditions softened in 2022; and are projected to moderate and remain below potential over the near term, based on the elevated inflation levels.

Inflation remained elevated in 2022, driven by both demand pressures and supply shocks. The two price readings since the last MPC meeting showed a significant jump in headline inflation, to 54.1 percent in December 2022 from 50.3 percent in November and 40.4 percent in October 2022.

The updated Composite Index of Economic Activity (CIEA) showed a continued dip in economic activity, despite the slight improvement in consumer and business sentiments from the latest surveys. In nominal terms credit to the private sector rose sharply, but was moderated in real terms by price pressures.

Further, into the fourth quarter, the Bank’s high-frequency indicators recorded a moderation in economic activity, as the real CIEA contracted by 6.2 percent in November 2022 compared with a growth of 10.2 percent in the same period of 2021. The major items that weighed down the index during the period were port activity, cement sales, imports and industrial consumption of electricity.

Similarly, economic activity – as tracked by Ghana Statistical Services (GSS) – for the first three quarters of 2022 was within projections, albeit at a moderated pace than a year earlier; expanding at an annual rate of 3.6 percent during the first three-quarters of 2022 relative to 4.8 percent during the corresponding period in 2021.

Globally, the economic outlook remains uncertain owing to broad-based and elevated inflation, policy tightening, worsening financing conditions and lingering spill-over effects from geopolitical tensions. These headwinds are likely to persist through the first half of 2023, driving down confidence and weakening real household disposable incomes in advanced and emerging market economies.

For emerging and developing economies, growth momentum is projected to remain firm, supported by the relaxation of lockdown restrictions in China and still-high commodity prices. Though showing signs of cooling, inflation levels remain elevated; and central banks, especially in advanced economies, have signalled the need to maintain a tight monetary policy stance to contain inflationary pressures, albeit at a measured pace.