Private sector credit growth slows; As credit conditions remain tight

Private sector credit growth slows; As credit conditions remain tight

Private sector credit growth slowed to 18.8 per cent in February 2020, compared with a 21.8 per cent growth in February 2019, according to the latest Monetary Policy Committee report of the Bank of Ghana.

In real terms, private sector growth was 10.2 per cent at the end of February 2020, with the flow of credit to the sector largely dominated by the services industry (24.7 per cent).

This was followed by commerce and finance with 18.8 per cent, and Manufacturing with 10.7 per cent of the total credit.

In line with the growth in private sector credit, Bank of Ghana’s latest credit conditions survey conducted in February 2020, pointed to a net tightening of credit stance on loans to enterprises.

The survey findings indicated that credit conditions were likely to remain tight over the next two months.

Although loans to households eased during the survey period, the survey results suggested some marginal tightening of credit stance over the next two months, subject to the economic impact of the coronavirus pandemic.

GSE records marginal recovery

The MOC report also indicated that the Ghana Stock Exchange recorded some marginal recovery, although trading activity remained in the negative territory.

The Composite Index (GSE-CI) contracted by 10.8 per cent year-on-year in February 2020 compared with a 25.7 per cent contraction in the same period last year.

This was underscored by the weak performance of equities in the Finance, Manufacturing, and Food & Brewery sectors which impacted market capitalization negatively.

On a year-to-date basis, total market capitalization declined by 5.8 per cent to GH¢56.5 billion in February 2020.

In terms of market activity, the volume of traded shares was 29.22 million and valued at GH¢20.03 million. This compared with 6.7 million traded shares and valued at GH¢22.52 million in February 2019.

Favourable commodity prices

On commodity prices, the BoG indicated that Cocoa added to the gains made in January 2020 with prices increasing by 5.7 per cent to trade at US$2,825.90 per tonne.

The price increase was triggered by threats of dry weather in top growers, Ivory Coast and Ghana. This stoked concerns about the main crop season and pushed up prices.

Brent crude oil continued to suffer losses in February 2020 mainly on the back of the Coronavirus pandemic.

On average, crude oil traded at US$55.5 per barrel, a 12.8 per cent decrease from the US$63.7 per barrel recorded in January 2020. Prices also suffered from the ongoing oil price war between Russia and Saudi Arabia, alongside weak demand as the COVID-19 spread across several countries.

Spot gold prices continued to rise supported by global fundamentals. The yellow metal edged higher by 2.3 per cent to close at US$1,596.81 per fine ounce in February 2020 compared to the average price of US$1,560.74 per fine ounce in January.

Gold traded above US$1,500.00 per fine ounce over the first two months in 2020, reaching a high of US$1,670.58 per fine ounce. Gold prices benefitted from the safe-haven appeal by investors due to concerns over the devastating global economic fallout from the COVID-19 pandemic.