Fourth Quarter [2020] Economic Data Review

The Ghanaian economy remained under the ravaging impact of the COVID-19 pandemic as quarter three GDP figure showed that the economy struggled to recover from its worst contraction in four decades. This comes as some businesses remain closed whilst others struggle to pick-up momentum. Data released by the Ghana Statistical Service for the third quarter of 2020 showed that the local economy contracted by 1.1%, an improvement over the second quarter’s growth rate of -3.2%. Two out of the critical three sectors of the economy contracted with the industry and services subsectors contracting 5.1% and 1.1% respectively. A strong growth in the information & communication subsectors (+51.3%) was not enough to normalize a bigger contraction in the hotels & restaurant subsectors (-62.1%). Agriculture on the other hand expanded by 8.3% on the back of a bumper fish harvest.

The inflation rate began the last quarter of the year cooling off from inflationary pressures experienced in the second quarter of the year. The fourth quarter saw consumer prices sustaining the decline witnessed from the third quarter after the economy showed signs of picking up steam. The inflation rate temporarily fell into the Bank of Ghana’s medium-term inflation target band of 8.0% ± 2.0% for the first time since March in November with a rate of 9.8%. It, however, climbed to 10.4% to close the year following intense economic activities during the yuletide. As the risks to the inflation outlook persisted, the monetary policy committee of the BoG continued its cautious stance as it stalled the policy rate to close the year at 14.5%.

Trading activities on the floor of the Ghana Stock Exchange (GSE) picked up steam in the last quarter of the year as calm began to restore to most financial markets following positive developments made towards COVID-19 vaccines. Market activities on the local bourse picked up as the year drew to a close with the highest monthly trade figures in 2020 being achieved in December with 140.37 million shares valued at GHC 132.03 million exchanging hands. The GSE Composite Index accordingly recovered some of its losses as it ended the year with a year-to-date (YTD) depreciation of 13.98% from a YTD loss of 17.75% at the close of the third quarter.

The drastic fall in the yields on the government’s Treasury assets cooled off in the fourth quarter as inflationary pressures persisted on the back of fiscal slippages in line with the government’s ambitious spending to curb the impact of COVID on the economy. The yields on the 91-day, 182-day, and 364-day bills closed the year at 14.08%, 14.12%, and 17.00% representing a YTD depreciation of 3.96%, 6.93%, and 4.70% respectively. This compares a YTD performance of +0.69%, +0.69%, and +8.04% respectively over the same period in 2019. Medium to long-term papers issued in the quarter remained largely stable from third quarter levels. The 2-year note ended the year at 18.50%, whilst the 3-year, 5-year, and 7-year bonds closed the year at 19.25%, 19.85%, and 20.50% respectively.

The Ghana Cedi ended the year on a strong footing as it registered its biggest performance in more than 5 years against the US Dollar even in the midst of a global pandemic which had mainly witnessed a flee for safe-haven assets and currencies. Fears of political unrest as Ghana headed for the polls coupled with widened fiscal deficit impacted insignificantly on the local currency as various central bank policies remained supportive of the Cedi’s performance. The Cedi was exchanged for GHC 5.76, GHC 7.88, and GHC 7.07 against the Dollar, the Pound, and the Euro as the year drew to a close. It depreciated by 4.08% against the Dollar at the close of the quarter which compares with a YTD performance of -14.65% in 2019, -9.15% in 2018, and -5.13% in 2017.