• Ghana’s economy to grow at 6.8 percent in 2020.
• Government expected to spend GHS85.9 billion in 2020.
• Yields on short-dated treasury instruments recorded mixed adjustment.
• GSE posted whipsawed previous week’s gains.
• Cedi depreciated against all the three major trading currencies.
• Brent crude oil, Gold and Cocoa advanced but Coffee tumbled.

Macroeconomic update

Major economic indicators performance from Jan-Sept 2019

In the week under review, the Minister of Finance presented the 2020 budget statement. Highlighting Government’s revenue and expenditure plans for the upcoming year; the state of the major economic indicators was presented as follows.

Overall GDP which stood at 6.2 percent for the half-year of 2019, compares favourably to the 5.4 percent recorded in the same period in 2018. Economic growth has considerably been supported by non-oil economic activities as the growth in the sector improved from 4.6 percent in 2018 to 5.2 percent to 2019.

Rising Government financing led to a rising budget deficit of 4.5 percent of GDP in September and is projected to exceed the year-end target of 4.5 percent of GDP. Primary balance which results from external trading activities dwindled in the period under review, shrinking from a surplus of 0.7 percent of GDP in 2018 to a deficit of 0.3 percent of GDP in September 2019. Inflation assumed a downtrend taking the rebasing of the CPI into consideration; Inflation has fallen below the year-end target of 8.0 percent as it settled at 7.6 percent in September 2019.

Revenue and Expenditure outturns in Jan-September 2019

A summary of the fiscal performance of the Ghanaian economy in 2019 is also presented in the table below. Government’s total revenue mobilisation for the period ending September 2019 recorded an annual growth of 9.2 percent to GHS36.3 billion. This, however, missed the projected target of GHS42.00 billion representing 13.6 percent of GDP. Accounting for the short fall was falling oil prices and lower SSNIT contributions. About 75 percent of the overall revenue mobilisation was attributed to Non-oil revenue which stood at GHS27.2 billion.

Government planned expenditure target of GHS51.9 billion also missed the projected target of GHS56.1 billion, representing 7.5 percent deviation. Apart from interest payments which recorded an overrun of 2.7 percent, all other expenditure items were within targets. The GHS51.9 billion expenditure execution rates, however, outpaced the total revenue mobilisation for the period under review.

Macroeconomic Targets and Outlook for 2020

Economic activities are expected to sustain its robust growth as Government is keen on achieving the underlisted macroeconomic targets in the upcoming year;

• Overall Real GDP growth of 6.8 percent;
• Non-Oil Real GDP growth of 6.7 percent;
• End-period inflation of 8.0 percent;
• Fiscal deficit of 4.7 percent of GDP;
• Primary surplus of 0.7 percent of GDP; and
• Gross International Reserves of at least 3.5 months of imports cover.

Economic outlook ahead of 2020 appears bright despite an anticipation of growth slugs in 2021 and 2022. This follows the anticipation of activity slowdown in the mining and quarry sectors of the economy from the projected 13.1 percent in 2019, to 10.1 percent in 2020 and down to 1.2 percent in 2021. On the back of this, Ghana’s GDP growth is projected to dip to 4.9 percent in 2021, and further to 4.6 percent in 2022 but rebound to 6.5 percent in 2023, bringing the average GDP growth for the medium term to 5.7 percent.

At the sectorial level, the agriculture sector is expected to register a growth rate of 5.1 percent in 2020 but with an average medium-term growth rate of 5.4 percent. The sector is expected to be driven by the crops sub-sector. Outlook of the Industry sector puts the 2020 growth rate at 8.6 percent but the average medium-term growth rate at 5.2 percent. The expected decline follows slower activity levels within the mining and quarrying sub-sector. The services sector is projected to be driven by the Health and Social work subsector and the Public Administration and Defence and Social Security for the medium term. A growth rate of 6.3 percent is tipped for the medium term, but the overall sector expected to grow by 5.8 percent in 2020.

Expenditure measures for 2020

With 2020 being an election year and declaration by Government as year of infrastructure development, Government’s projected expenditure for the coming year is GHS85.9 billion, representing 21.2 percent rise of the projected expenditure for 2019. Presented in the table below is the expenditure allocation for the 2020 financial year:

Revenue Measures for 2020

As part of measures to shore-up Government’s revenue to finance its expected expenditure in 2020, the following revenue mobilisation strategies are expected to be rolled out;

• A 5-year renewal and extension of the National Fiscal Stabilisation Levy and Special Import Levies (SIL)
• Pursue Non-tax revenue inflows within the Telco’s and State-owned Enterprises to yield about 5% GDP.
• Adjustment of the personal income tax band
• Review current legislation for the purposes of taxing e-services
• Review and incorporate into law legislation  that will compile taxpayers to disclose their aggressive tax planning arrangements under the Base Erosion and Profit Shifting (BEPS)
• Review and amend revenue legislations to remove conflicts and address all sorts of gaps/deficiency in revenue collection.
• Adoption of punitive measures at the petroleum downstream sector to prevent under-reporting, diversion and dilution of fuel products and to ensure strict compliance.

October Inflation rose to 7.7 percent

Consumer Price Inflation rose marginally in the month of October 2019, following inflationary pressures recorded at the transportation and some food components of the CPI. Year-on-year inflation upped by 0.1 percentage points to settle at 7.7 percent in October against the 7.6 percent recorded in September 2019. Inflation for the Food and non-alcoholic beverages dropped by 150 basis points to settle at 7.00 percent but had one of its sub-sectors – Fruits and nuts recording the highest rate of about 20 percent. Inflation at the Non-food sector however, rose by 120 basis points to 8.20 percent in October 2019, driven by alcoholic beverages and transportation sub-sectors.

Source: BOG; MOFEP; GSS.     * represents provisional estimate

Government of Ghana Treasury Securities

NB: The above are the annual yields on Government of Ghana Treasury Securities.

Last Friday, the yield on the 182-Day rose by a basis point to settle at 15.14 percent. Interest rate on the 364-Day T-Bill however, eased by a basis points to settle at 17.91 percent but the rate on the 91-Day T-Bill was unchanged at 14.68 percent. Yields on the Government of Ghana treasury notes and bonds also remained unchanged as they were not scheduled for week's auction.

Government raised GHS631.62 million from the primary market out of the GHS651.6 bids tendered by investors. The amount raised was in excess of the week’s target of GH500.00 million but lower than  the GHS91404 million raised at the previous auction. The 91-Day T-Bill was the most accepted bid, constituting 79.64 percent of the overall bids accepted by the Government. At the upcoming auction, an amount of GHS918.00 million is expected to be raised by the Government from the sale of the short-dated treasury securities.

Following Government’s revenue targets to finance its developmental projects in the upcoming year, interest rates on the Government of Ghana treasury securities are projected to record some upward movements as Government focuses on the primary market to raise some funds. To control the rate hikes, it is expected that strategies needed to improve government revenue such as value creation should be deployed to minimise borrowing appetite of the Government.

Ghana Stock Exchange

The Ghana Stock Exchange failed to sustain its recovery despite recent release of upbeat quarterly earnings report by some listed companies. At the closing bell, the GSE Composite Index thus posted a week-on-week loss of 0.83 percent to settle at 2,151.51 points, representing a year-to-date loss of 16.36 percent. The GSE Financial Stocks Index also declined by 1.87 percent to settle at 1,809.08 points, corresponding to a year-to-date return of 16.00 percent.

Total market outturn stood at 1.88 million shares valued at GHS3.69 million. This represents 51 percent increment from the previous week’s trade of 1.25 million valued at GHS2.12 million. Liquidity was largely driven by CAL Bank Ltd and MTN Ghana Ltd as they jointly accounted for 81.63 percent of the overall traded volume. Market capitalization thus, dropped by 0.33 percent to settle at GHS55,703.14 million.

Stock Price Movements

At the pairing of the week’s opening and closing prices, 8 equities altered their share prices. Enterprise Group Ltd led the bulls run with price uplift of 10 pesewas to trade at GHS1.70 per share. Total Petroleum Ltd and Société General Ghana Ltd advanced by 5 pesewas and 3 pesewas to trade at GHS2.87 and 72 pesewas per share respectively. CAL Bank Ltd also upped by 2 pesewas to trade at 82 pesewas per share. 

On the flip side of the market, Standard Chartered Bank Ltd was the worst performing stock, losing GHS14.01 pesewas to trade at GHS15.55 per share. Ecobank Ghana Ltd and GCB Bank Ltd dropped by 9 pesewas and 1 pesewa to trade at GHS7.80 and GHS4.85 per share respectively. SIC Ltd also went down by a pesewa to trade at 10 pesewas per share. 

Currency Market

Source: Bank of Ghana 15.11.19

At the close of the interbank currency market, the Ghana cedi advanced against the Pound and the Euro but depreciated versus the US Dollar. The US dollar rose on the interbank forex market buoyed by trade war uncertainties and bullish economic data. Investor’s doubts on an imminent trade deal between the US and China following disagreements in the ongoing negotiations by both parties shifted investors demand to the safe haven currency. Upbeat consumer price inflation data which rose to a seven-month high of 0.4 percent on month-on-month basis beating the projected 0.3 percent rise also contributed to the greenbacks gain. The US dollar thus recorded a week-on-week appreciation of 0.02 percent as it traded at GHS5.36 on the interbank currency market. The year-to-date depreciation of the cedi thus widened to 10.09 percent.

The British pound slipped against its major peers on the international currency market as economic uncertainties in the UK amid its upcoming general election weighed on the currency. Investors decision to rather focus on the broader economic outlook of the UK economy after elections amid signs of a potential rate cut by the Bank of England affected demand of the currency. The pound however, recorded a week-on-week appreciation of 0.78 percent as it traded at GHS6.93 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 10.86 percent.

The Euro tumbled on the international currency market as persistent bearish sentiments muted the impact of strong economic data in the bloc. Germany’s economy grew by 0.1 percent in the three months ending September 2019 better the projected 0.1 percent contraction. This failed to support the single currency on account of investor’s scepticism on the shared currency’s prospects and the European Central Bank’s strong commitment to maintain loosening monetary policy. The Euro, however, posted a week-on-week appreciation of 0.22 percent against the cedi to sell at GHS5.93. The year-to-date depreciation of the cedi thus rose to 6.94 percent.

International Markets

The Wallstreet closed on a positive note spurred by Trump’s policy reforms at US health sector which overall seeks to improve price transparency. This development, which lifted the health sectors stocks to their 10-months high significantly together with upbeat financials from Apple and Home Depot, contributed to the robustness of the market in the week under review. S&P 500 thus posted a week-on-week gain of 0.85 percent to settle at 3,093.08 points. The Dow Jones Industrial Average Index also recorded a 1.22 percent week-on-week rise to 27,681.24 points.

The London Stock Exchange took a nosedive arising from the political uncertainties surrounding the UK Brexit. The decision by UK’s Labour Party to improve and make internet facilities free by buying full-fibre broadband mounted pressure on the telecommunication stock – BT Group which trimmed 0.83 percent of its share price. The FTSE 100 thus went down by 0.77 percent to settle at 7,302.94 points.

The Japanese Stock Exchange tumbled as investors sentiment remained fragile on account of weak economic data from China and Germany which sparked concerns of global economic slowdown. The Nikkei 225 thus went down by 0.38 percent to settle at 23,303.32 points.

On the African equity market, the Nigerian All Share Index rose further by 2.04 percent to close at an index level of 26,851.68 points. The Johannesburg All Share Index on the other hand, recorded a week-on-week decline of 0.99 percent to close at 56,054.77 points. The Nairobi All Share Index also went down by 3.11 percent to settle at 155.98 points.

Source:www.bloomberg.com, & www.investing.com

Brent crude oil recorded gains due to production cut forecast for non-cartel countries for 2020. OPEC cut its 2020 non-production growth estimate by 34,000 barrels a day to 2.17 million barrels a day for non-cartel countries which contributed to the positive closure of the energy commodity. Brent crude oil thus rose by 22 cents to trade at $62.30 per barrel.

Gold ended the trading week in the gains, as investors demanded more of the safe-haven asset after the release of robust US retail sales and industrial production data sparked fears of interest rate cut in the US. Gold thus added $5.60 to trade at $1,468.50 per ounce.

Cocoa improved its value on the international commodities market supported the recent Ivory Coast – Ghana joint measure to control prices whilst at the same time improving the livelihood of farmers. The positive closure of the soft crop was also spurred by heavy rains which interrupted the supply of the beans from Ivory Coast onto the international market in the week under review. Cocoa thus added $263.00 to trade at $2,766.00 per metric tonne.

Coffee tumbled as buyers took advantage of the soft Brazilian real despite report of unfavourable climatic conditions. Coffee thus went down by 3 cents to trade at $1.06 per pound.