Business confidence increases significantly – Governor Addison

The Bank of Ghana (BoG) says its latest survey conducted in December 2023 showed a strong rebound in both consumer and business sentiments, reflective of the signs of recovery, Governor Dr Ernest Addison has said.

Consumer confidence, he said,  improved on account of easing inflationary pressures which led to optimism about future economic conditions.

Similarly, he added, business confidence increased significantly, signalling improving consumer demand, as firms met short-term targets and expressed positive sentiments about company and industry prospects. The survey findings were broadly aligned with observed trends in Ghana’s Purchasing Managers’ Index (PMI), which improved to 51.8 in December 2023 from 51.6 in the previous month.


Addressing the 116th Monetary Policy Committee (MPC) press conference in Accra on Monday, January 29, Dr Addison said that the disinflation process, which began earlier in the year, continued through to the last quarter of the year supported by strong policies, relative exchange rate stability, and effective liquidity sterilization efforts.

“Headline inflation sharply decelerated to 23.2 percent in December 2023, from a peak of 54.1 percent at the end of December 2022. The decline in inflation was driven by both easing food and non-food prices,” he stated.


He added that food inflation decelerated sharply to 28.7 percent in December 2023 from 59.7 percent in December 2022, while non-food inflation also fell to 18.7 percent from 49.9 percent over the same comparative period.

Core inflation has also eased significantly, affirming broad decline in prices. The Bank’s core inflation measure, which excludes energy and utility, more than halved to 24.2 percent in December 2023, down from 53.2 percent in December 2022. Similarly, inflation expectations by the banking sector, businesses, and consumers have declined.


Fiscal policy implementation was broadly aligned with requirements under the IMF ECF-supported programme. Provisional data shows that the performance criteria targets on the primary fiscal balance on a commitment basis, non-accumulation of external debt payment arrears, no new collateralized debt by central government and public entities, all of which are broadly on course for attainment. Fiscal performance based on provisional banking data on budget execution for January to December 2023 shows a deficit of around 3 percent of GDP, against a target of 5.5 percent of GDP.

“Base money growth slowed down significantly in the course of 2023 and was supportive of the disinflation process. Growth in reserve money defined to include currency outside banks and commercial banks reserves, slowed down significantly to 29.2 percent by end December 2023 relative to a growth rate of 57.5 percent observed in December 2022. The sharp slowdown was driven in large parts by strong sterilization efforts and effective liquidity management operations,” Dr Addison said.

With a tight monetary policy stance and increased risk aversion of banks due to rising credit risks, private sector credit expansion broadly remained sluggish in the year, he said. In December 2023, he added, the pace of growth in private sector credit slowed to 10.7 percent, compared with 31.8 percent annual growth in December 2022. In real terms, credit to the private sector contracted by 10.2 percent relative to a 14.5 percent contraction, recorded over the same comparative period.

On the money market, he added, interest rates broadly trended downward at the short end of the yield curve. The 91-day and 182-day Treasury bill rates decreased to 29.49 percent and 31.70 percent respectively, in December 2023, from 35.48 percent and 36.23 percent respectively, in the corresponding period of 2022. Similarly, the rate on the 364-day instrument decreased to 32.97 percent in December 2023 from 36.06 percent in December 2022.

“The interbank weighted average rate remained well-aligned within the policy corridor by the end of 2023. The weighted average rate increased to 30.19 percent in December 2023 from 25.51 percent in December 2022, in line with the monetary policy rate and supported by adjustments made in the cash reserve ratio. The average lending rates of banks eased marginally to 33.75 percent in December 2023 from 35.58 percent a year earlier,” he said.

Dr Addison further stated that the banking sector’s performance improved as adverse spillovers from the domestic debt restructuring and macroeconomic challenges receded. As at end 2023, the data shows that the banking sector remains stable, liquid, and profitable. Profitability improved for the sector from the loss position recorded in the 2022 audited accounts, reflecting sustained increases in net interest income and fees and commissions.

“The industry’s balance sheet was generally strong, underscored by increased assets in December 2023, funded largely by deposits. Key financial soundness indicators remained broadly positive with the Capital Adequacy Ratio (adjusted for reliefs) above the regulatory minimum, while liquidity and profitability ratios were higher in December 2023 compared to the same period last year. The Non-Performing Loan ratio, however, increased in 2023, because of general repayment challenges on the part of borrowers, reflecting the impact of general macroeconomic challenges encountered in 2022. The latest stress tests indicates that the sector remains stable on the back of the on-going recapitalisation process by shareholders alongside support from the Ghana Financial Stability Fund,” he said.

The Committee reduced the policy rate from 30 to 29 percent.

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