The First Deputy Governor of the Bank of Ghana, Maxwell Opoku-Afari, has given indications that contrary to fears that the country’s economy will take some time before it gets back on track, data available to the Central Bank suggests that the economy is on its way to recovery.
According to Dr Opoku-Afari, even though Ghana experienced a contraction in economic activity in the second quarter of this year, the Composite Index of Economic Activity (CIEA) shows significant recovery in the third quarter.
“What we have seen at the central bank [is that] one of the advantages we have is to have access to what we call ‘high-frequency leading indicators’,” he said.
“Putting all those high-frequency leading indicators together, we have been able to put together what we call the Composite Index of Economic Activity, which helps us track short-term dynamics in economic activities and gives us a sense of where economic activity is going to.
“Even though we saw a contraction in the second quarter, the data that we are picking from the Composite Index Economic Activity and ‘high frequency’ data, including credit to the private sector, manufacturing, sales and a few other things shows that we are beginning to see some significant recovery already in the first few months of the third quarter up to September and in fact throughout the third quarter,” he said.
V, not U or W
As a result of the novel coronavirus pandemic Ghana’s economy has contracted by 3.2 percentage points this year, compared to the 5.7% growth recorded in the same period last year. The virus, which made necessary a three-week lockdown of major commercial zones of Ghana in March, forced many businesses to close.
However, providing an update on the economy on the Accra-based Mx24 TV, Dr Opoku-Afari expressed optimism that despite the contraction, the country’s economy is beginning to turn the corner.
“This recovery is quite significant, to the extent that we think that growth will be positive in the third quarter. If you put it that way, then the leading indicators are pointing to what we will call a V-shaped recovery because of the significant negative impact we expected as a result of the lockdown … we expected the restrictions to be prolonged but we saw that there was a gradual lifting of those restrictions.
“This meant that the impact on economic activities has not been as severe, even though it is a contraction, because -3.2 is not a small contraction. But to have a turnaround in the third quarter shows that the recovery is going to be more of a V-shape than a U or a trapezoid,” the First Deputy Governor said.