Soaring inflation, fuel price & transport fares cause business confidence to fall by 9.6% – BoG

The Bank of Ghana has said its business and consumer confidence surveys conducted in February 2022, revealed “a softening of sentiments with business confidence declining by a greater extent”.

It said while consumer confidence dipped by 0.7 percentage points, business confidence declined by 9.6 percentage points.

The central bank Governor Dr Ernest Addison said at the Monetary Policy Committee’s 105th meeting on Monday, 21 March 2022: “Consumers were mainly concerned about the persistent increases in fuel prices, increases in transportation fares and rising inflation”.

“Businesses, in addition to these factors, were also concerned about the impact of these on macroeconomic conditions and on their short-term targets and profitability for 2022”, Dr Addison added.

The bank said these survey findings were broadly in line with observed trends in the February 2022 Ghana Purchasing Managers Index (PMI).

The Ghana PMI, which is a measure of the rate of inventory accumulation by managers of private sector companies, declined below the 50.0 benchmark on the back of weak output and purchasing activity amidst rising inflation, the central bank noted.

It said “notwithstanding the sustained growth momentum, rising food prices, upward adjustments in petroleum prices and its effect on transport fares, and exchange rate depreciation pass-through have pushed up inflation to 15.7 per cent at the end of February 2022, 5.7 percentage points outside the medium-term target band”.

Food inflation “jumped sharply” from 12.8 per cent in December 2021 to 17.4 per cent in February 2022, while non-food inflation jumped from 12.5 per cent to 14.5 per cent over the same period.

Also, underlying inflationary pressures have increased, the BoG said, “signalling broad-based price pressures”.

The bank’s core inflation measure (defined to exclude energy and utility prices), increased from 11.8 per cent in December 2021 to 13.6 per cent in January 2022 and further up to 15.4 per cent in February 2022.

Similarly, weighted inflation expectations comprising consumers, businesses, and financial sector, also picked up significantly over the period, the bank said.

The central bank said: “Provisional data on budget execution for 2021 indicated an overall broad fiscal deficit (cash, excluding financial sector clean-up costs) of 9.7 per cent of GDP, against the programmed target of 9.4 per cent of GDP. The corresponding primary balance for the period was a deficit of GH¢8.9 billion (2.0 per cent of GDP), against a deficit target of GH¢8.7 billion (2.0 per cent of GDP). Over the year, total revenue and grants amounted to GH¢67.9 billion (15.4 per cent of GDP), below the projected GH¢72.5 billion (16.7 per cent of GDP). Total expenditure amounted to GH¢110.4 billion (25.1 percent of GDP), below the programmed target of GH¢113.8 billion (25.9 per cent of GDP)”.

“These developments impacted the stock of public debt which increased to 80.1 per cent of GDP (GH¢351.8 billion) at the end of December 2021, compared with 76.0 per cent of GDP (GH¢291.6 billion) at the end of December 2020. Of the total debt stock, domestic debt was GH¢181.8 billion (41.4 per cent of GDP), while the external debt was GH¢170.0 billion (38.7 per cent of GDP)”.


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