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Bank of Ghana
Monetary Policy Report
Real Sector Developments
Volume 6: No.1/2013
February 2013
6.0 Economic Growth
Economic growth in Sub-Saharan Africa remained firm at 4.6 percent in 2012. Excluding South Africa, the
region’s largest economy, GDP output expanded by 5.8 per cent, with a third of countries growing by at
least 6 percent. According to the World Bank, the growth outturn was supported by increased domestic
demand, still high commodity prices, increased export volumes (due to new discoveries in natural
resources, including oil) and steady remittance flows.
In the domestic economy, provisional estimates for 2012 indicated that real GDP growth (with oil) was 7.1
percent, compared to a target of 9.4 percent and 14.4 percent in 2011. The services sector recorded the
highest growth of 8.8 percent, followed by industry (7.0%), and Agriculture, with 2.6 percent growth. The
lower than expected outturn was due to base effects following the addition of the oil sector to the economy
in 2011. It is anticipated that Ghana Statistical Services may review the final 2012 GDP growth outturn
upwards.
The 2012 real GDP outturn was supported by improvements in some key indicators of economic activity.
Consumer demand, proxied by retail sales and domestic VAT collections remained firm with respective
year-on-year growth of 48.3 percent and 38.6 percent. Transport sector activities – proxied by new vehicle
registrations compiled by DVLA – also recorded an annual growth of 87.3 percent in 2012. Construction
activities however slowed down, as suggested by a 13.5 percent year-on-year contraction in cement sales
during 2012.
6.1 Composite Index of Economic Activity
The December 2012 update of the Bank of Ghana Composite Index of Economic Activity (CIEA) pointed to
a moderated pace of economic expansion in the year compared to 2011. The real composite index rose to
340.14 in December 2012 from 318.55 in December 2011, representing a yearly growth of 6.8 percent
compared to 14.9 percent for the same period last year.
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Trends in Real CIEA Index
350.00
300.00
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100.00
50.00
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Mar-08
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Jun-09
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The seasonally adjusted real CIEA improved to 329.38 in 2012 from 307.35 in 2011, suggesting a
seasonally adjusted real growth of 7.2 percent. The quarterly dynamics however suggested a pickup in
activities during the fourth quarter, up by 5.1 percent following a modest growth of 0.9 percent in the third
quarter and a contraction of 1.8 percent in the second quarter of 2012. All of the components of the CIEA
recorded positive growth rates on yearly basis with the exception of SSNIT contribution.
6.2 Business Confidence Index
Business confidence bounced back strongly after an observed softening in business sentiments for six
consecutive survey rounds.
The observed downturn in business sentiments was influenced mainly by
increased volatility in the foreign exchange market and sharp depreciation in the currency during the first
half of 2012.
Overall, Business Confidence Index improved to 104.1 in December 2012, from 94.3 in
September.
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Business Confidence Index, Apr-03 = 100
120
110
106.60
104.07
100
95.3
90
Apr-03
Jun-03
Aug-03
Nov-03
Jan-04
Apr-04
Jun-04
Sep-04
Jan-05
Apr-05
Jun-05
Aug-05
Oct-05
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Apr-06
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Apr-07
Jul-07
Sep-07
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Feb-08
Apr-08
Jun-08
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Oct-08
Jan-09
Apr-09
Jun-09
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Jan-11
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Mar-12
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80
Looking ahead to 2013, the survey suggested that businesses were more optimistic about company
prospects, in particular, capital expenditures, sales, employment, and profits. Business inflation
expectations over the medium-term horizon have also improved. In particular, the proportion of
respondents who expect medium-term inflation to remain in single digits improved to 48.3 percent for
2013, from 21.4 percent in 2012. In addition, 88.5 percent of firms surveyed indicated that commercial
bank lending rates could fall below 30 percent in the medium term, compared to 89.8 percent in 2012.
Also, 66.7 percent of surveyed firms were optimistic about industry prospects for 2013 against 75.5
percent in 2012, while 58.6 percent of surveyed firms were more optimistic about growth prospects in
2013, relative to 54.1 percent in 2012.
6.3 Consumer Confidence Index
The Consumer Confidence Index improved to 105.1 in January 2013 from 101.1 in October 2012. On yearon-year basis, the overall consumer confidence index grew by 8.9 percent over the January 2012 level of
95.5. Consumer sentiments were boosted by a positive outlook on both current and future economic
conditions, improvements in household financial situations and relative stability in consumer prices.
However, consumers had concerns about employment opportunities.
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6.4 Outlook
Economic growth is projected at 8.0 percent (with oil) and 6.5 percent (excluding oil) for 2013; this is
expected to be driven largely by increased oil production and infrastructural developments. The optimism
expressed by both businesses and consumers about economic and business prospects coupled with lower
inflation expectations may also provide some support for increased economic activities during 2013.
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