Governor of the Bank of Ghana, Dr. Ernest Addison has assured of intensified surveillance of the economy to ensure that the unpredictabilities surrounding food prices, petroleum price adjustments, among others do not exert inflationary pressures on the country’s economic outlook for 2022.
Ghana’s inflation rate for 2021 has witnessed an upward trend in recent times.
It started the year at 9.9 percent in January but currently stands at 11.0 percent, outside the medium-term target band of the Central Bank, due to an increase in food and transport prices.
Delivering the keynote address at the 2021 Annual Bankers Dinner of the Chartered Institute of Bankers, Dr. Ernest Addison noted that, though the economic outlook for 2022 is positive these potential risks should be checked.
“The economic outlook for 2022 is positive although there are some potential risks which should be closely monitored. In particular, the uncertainties surrounding food prices, petroleum price adjustments,
and the potential second-round effects of these are likely to exert inflationary pressures in the outlook.
The recent widening of Ghana’s sovereign bond spreads after a successful bond issue in April 2021 surprised all of us, although we were aware of investor sentiments and their assessment of Ghana’s fiscal risks as they see the fiscal deficit outturn for 2020 as unsustainable and expecting very bold and decisive measures from the government to re-anchor fiscal consolidation and stabilize debt,” he said.
He noted that the widening spread triggered investor sell-offs and has created a huge financing gap and subsequently put pressure on the local currency, adding, “as a Market Access Country, we have a huge burden to demonstrate a strong recovery and to ensure that the bold revenue measures introduced yield the required results.”
“We are at a point where there is no room for policy forbearance on all levels, otherwise the huge financing burden could unravel the anchor and erode the gains we have made in the last 4 years. This calls for a social contract on fronts with common aspirations across the aisle to make sure we sustained the recovery momentum”, the Governor intimated.
Banking sector outlook positive
The Governor also said broadly, the banking sector outlook remains positive.
This he attributed to the results from the November 2021 stress tests show a banking sector that remains resilient to mild and moderate credit risk and liquidity stress conditions.
“The potential effects of a prolonged pandemic on the banking sector, particularly on asset quality, however, needs to be monitored carefully to inform policy measures. The Monetary Policy Committee decided that macroprudential policy measures and regulatory reliefs announced at the onset of the pandemic should remain in place to support a more robust recovery of the economy”, Dr. Addison said.