Monetary Policy
MPC Press Release - May 2006
Wednesday, 31 May 2006 00:00

The economic indicators available to the Bank suggest that economic activity remains robust through the first quarter of 2006. The Bank of Ghana’s Composite Index of Economic Activity increased in nominal, and real terms, during the first quarter of 2006 as the economy continued on a cyclical upswing. The index rose by 4.8 percent compared to 4.5 percent in the last quarter of 2005. Major components of the index, indicators such as imports, exports, port activities, private sector contributions to SSNIT on behalf of employees, industrial electricity consumption, credit to the private sector, tourist arrivals, and cement sales recorded above trend increases during the quarter.

The Index rose by 4.1 percent in real terms in the quarter, compared with 2.0 percent in the preceding quarter. But there were some soft spots. Domestic VAT collections as well as monthly sales of some key enterprises declined during the quarter in a pattern observed in the past. As at the end of April 2006, cumulative purchases for the 2005/2006 main cocoa season amounted to 524,900 metric tonnes, close to the projected total purchases for the season of 550,000 metric tonnes and 9.3 percent above last year’s level. The Bank of Ghana Survey of Business Confidence also indicates that business confidence in the economy edged up during the first quarter of 2006.

Along with the upswing in economic activity, domestic credit has expanded rapidly. Credit to the private sector and public institutions by the deposit money banks (DMBs) expanded by ¢5,559.0 billion (an increase of 42.1 percent) in the twelve months to March 2006 (the latest data available). A significant proportion of the increase occurred during the last nine months of the period, more than doubling the increase of ¢2,602.5 billion recorded for the same period in 2005.

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