GDP growth may collapse to 2.5% in 2020- BoG fears
March 19, 2020
The Bank of Ghana has said that it fears the plague from the Coronavirus disease will collapse GDP growth in the economy to 2.5 per cent in 2020.
The Governor of the central bank, Dr Ernest Addison, in a statement issued Wednesday, March 18, 2020 says the 2.5 per cent growth rate would be a “worst case scenario” impact from the challenges of the disease on the local economy.
Dr Addison, however, said a preliminary baseline assessment
of the impact of the disease indicates that the economy could grow at five per
cent this year as a result of the COVID-19.
The projected economic growth in the 2020 budget was 6.8 per
cent, but the Governor is saying that Covid-19 scourge would result in
shortfalls in imports, exports, taxes and foreign exchange, “which will
culminate in slowdown in economic activity.”
“These assessments are preliminary as the situation is very
fluid and the degree of uncertainty concerning the outbreak is very high. This
means that there is a likelihood that these assessments could change rapidly”,
the statement read.
The latest inflation reading for February 2020 is estimated
at 7.8 per cent, however, this figure is expected to remain within the target
band for the next quarter.
Other measures to curtail shortfall in GDP growth
In addition, the BoG announced some measures to contain the impact of the COVID-19 on the Ghanaian economy
For instance, the Primary Reserve Requirement has been
reduced from 10 per cent to 8 per cent to provide more liquidity to banks to
support critical sectors of the economy.
This effectively extends the previous targeted reserves for
SMEs under the enterprise credit scheme to all critical sectors.
Again, the Capital Conservation Buffer (CCB) for banks of
3.0 per cent has been reduced to 1.5 per cent.
This is to enable banks to provide the needed financial
support to the economy. This effectively reduces the Capital Adequacy
Requirement from 13 per cent to 11.5 per cent.
Furthermore, Provisioning for Loans in the “Other Loans
Especially Mentioned” (OLEM) category is also reduced from 10 per cent to 5 per
cent for all banks and Specialised Deposit-Taking Institutions (SDIs) as a
policy response to loans that may experience difficulty in repayments due to
slowdown in economic activity.
However, provisioning norms for loans in all other categories
are maintained. This should provide capital relief to banks and SDIs in these
Loan repayments that are past due for Microfinance
Institutions for up to 30 days shall be considered as “Current” as in the case
for all other SDIs.
Review of charge on digital transactions
Meanwhile, the Bank of Ghana has agreed with banks and
mobile network operators on measures to facilitate more efficient payments and
promote digital forms of payments for the next three months effective March 20,
However, these measures are subject to review by the BoG and
the mobile network operators should the pandemic be brought to control.
As a result of this, all mobile money users can send up to GH₵100 for free (excluding cash out). This includes sending to a recipient on the same network, or another network via the interoperability platform.
All mobile phone subscribers are now permitted to use their already existing mobile phone registration details to be on-boarded for Minimum KYC Account.
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