For a third consecutive period this year, the sentiments of Ghana’s business community, as measured by the index derived from the Bank of Ghana’s (BoG) Business Confidence Survey, has depicted rising confidence in the prospects of their businesses.
In the latest survey, the sentiments have further improved to 99.6 percent in October 2019 compared to 95.1 percent recorded in the same period of 2018.
Sentiments of the business sector dampened marginally during the second survey in June 2019 to 94.1 percent from 94.3 percent in April 2019. However, business confidence made a recovery in August 2019 as shown by the index climbing to 98.1 percent.
The rebound in business confidence has been attributed mainly to favourable company and industry prospects, the positive macro-economic growth outlook and declining lending rates.
This economic indicator measures the amount of optimism or pessimism that business managers have about the prospects of their companies, as well as providing an overview of their impressions about state of the economy.
The Business Barometer Indicator (BBI) of the Association of Ghana Industries (AGI), similarly recorded a rising confidence from 99.8 in first quarter to 103.2 points for the second quarter of 2019.
Nonetheless, in this second half of 2019, the Association has pointed out that high cost of raw materials, and electricity, as well as the current tax regime remain major constraints to growth of local industry.
Consumer Confidence
On the other hand, the BoG’s latest consumer confidence survey indicates that consumer sentiments remained broadly unchanged from the previous survey, done a couple of months earlier.
There was a 0.4 percentage point decline in the consumer confidence index which recording 95.6 percent, down from 96 percent recorded in August 2019.
The Consumer Confidence Survey reflects prevailing consumer sentiments as expressed by households and likely developments in those sentiments for the months ahead.
Composite Index
The Bank’s updated Composite Index of Economic Activity (CIEA) continues to show a steady pick-up in economic activity, albeit at a slower pace than during the corresponding period of last year.
The CIEA recorded an annual growth of 4.4 percent in September 2019, compared with 5.8 percent, year on year, as at the corresponding period of 2018.
The Governor stated that the key drivers of economic activity during the period were port activity, domestic consumption, tourist arrivals and DMB’s credit to the private sector. Instructively, even though the CIEA measures economic activity as against value generated, which Gross Domestic Product measures, the CIEA has historically correlated quite closely with GDP trends and thus serves as a general confirmation of economic growth trends as measured by the Ghana Statistical Service. Data from the GSS claims that GDP growth was percent, year on year, as at 6.2 percent as at mid year.
Commercial banks’ credit to the private sector has also continued to improve. Annual growth in private sector credit was 14.0 percent in October 2019, compared with 11.4 percent for the same period of 2018. In real terms, private sector credit expanded by 5.9 percent compared with 1.7 percent over the same comparative period.
The latest credit conditions survey conducted by the Bank in October 2019 pointed to an ease in the credit stance on loans to households. However, credit stance on loans to enterprises tightened, reflecting continuous efforts by the commercial banks to safeguard the quality of their loan portfolio through improved due diligence and credit risk management.
