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Ghana’s monetary recovery on the high


The Bank of Ghana (BoG) has disclosed that it expects real sector activity to recover close to its potential in the near term, on account of improving growth expectations, accommodative monetary conditions, and increasing foreign demand.

However, BoG warned that the recent tightening of monetary conditions to address inflationary pressures and support the fiscal consolidation are likely to moderate the recovery momentum over the medium term.

In its Monetary Policy Report for May 2022, BoG stated that domestic economic activity continued to pick up strongly in the Ghanaian economy. The Central Bank’s latest high frequency indicators recorded broad-based improvement in key real sector indicators in March 2022 compared to a year ago.

Domestic VAT collections, private sector contributions to social security, industrial consumption of electricity and tourist arrivals all improved in the first quarter of 2022.  However, cement sales and port activity contracted in the first three months of the year.

Consumer Spending

Consumer spending, proxied by domestic VAT collections and retail sales, posted a mixed performance in March 2022, compared with the corresponding period in 2021.

Domestic VAT collections increased by 21.5 percent on a year-on-year basis to GH¢649.93 million, from GH¢534.80 million in March 2021.

“On a month-on-month basis, domestic VAT improved by 10.8 percent in March 2022 from GH¢586.65 million in the preceding month. Cumulatively, total domestic VAT for the first quarter of 2022 went up by 14.7 percent to GH¢1,808.04 million, compared with GH¢1,576.61 million for the corresponding period of last year”.

The relative improvement in domestic VAT collections, according to BoG, largely reflected increased household consumption during the review period.

Retail sales, on the other hand, dipped marginally by 2.9 percent year-on-year to GH¢114.05 million in March 2022, down from the GH¢117.46 million recorded in the same period in 2021.

Compared to February 2022, retail sales declined by 5.6 percent in March 2022.

Manufacturing Activities

Meanwhile, activities in the manufacturing sub-sector, gauged by trends in the collection of direct taxes and private sector workers’ contributions to the Social Security and National Insurance Trust (SSNIT) Pension Scheme (Tier-1), improved in March 2022.

Total Direct Taxes collected increased by 25.6 percent (year-on-year) to GH¢3,478.67 million in March 2022, relative to GH¢2,769.94 million recorded in a similar period in 2021.

Cumulatively, total Direct Taxes collected for the first quarter of 2022 went up by 14.1 percent to GH¢6,529.91 million, from GH¢5,721.46 million for the same period in 2021.

In terms of contributions of the various sub-tax categories, Corporate tax accounted for 64.0 percent, Income tax (PAYE and self-employed) accounted for 28.0 percent, while “Other Tax Sources” contributed 8.0 percent.

Total private sector workers’ contribution to the SSNIT Pension Scheme (Tier-1) increased by 23.8 percent in year-on-year terms to GH¢258.80 million in March 2022, up from GH¢208.99 million collected during the corresponding period in 2021.

Cumulatively, for the first quarter of 2022, the contribution grew by 26.4 percent to GH¢733.45 million, relative to GH¢580.37 million recorded in the same period in 2021.

Meanwhile, activity in the construction sub-sector, proxied by the volume of cement sales, declined by 5.1 percent (year-on-year) in March 2022 to 366,056.20 tonnes, down from 385,640.92 tonnes recorded a year ago.

The decline in total cement sales was due to a slowdown in construction activities during the review period, BoG explained.

Other real sector indicators such as Consumption of electricity by industries and International passenger arrivals also improved in the first half of the year. Transport sector activities and International trade at the country’s two main harbours (Tema and Takoradi) however, declined in the review period.

These developments within the real sector resulted in the Bank’s updated Composite Index of Economic Activity (CIEA) posting an annual growth of 4.6 percent in March 2022, compared with a growth of 26.8 percent and a contraction of 1.9 percent in the corresponding periods of 2021 and 2020 respectively.

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