Experts on Wednesday said the banking sector must help speed up growth in 2011 through adequate support to the business sector, especially ancillary services that would emerge on the back of the oil economy.
“We need the banking sector to support growth, especially ancillary services that will emerge on the back of the oil economy. There must also be an enhanced effort in sustaining macroeconomic stability and growth,” said Sampson Akligoh, Senior Economic Analyst with Databank.
He said the ability of commercial banks to substantially lower interest rates would only emanate from further banking sector reforms and asked government to push for reforms that would aim at correcting the interest rate debate facing the economy.
“I think it is now very clear that the banking laws must get commercial banks to re-focus on their core business and this is very critical for Ghana’s long-term growth,” he said.
Mr Akligoh said the Monetary Policy Committee’s determination of interest rates would continue to move in line with inflation and forecast the policy rate to close 2011 at 11.5 per cent.
He said as government spending intensified, and the global economy recovered, there would be renewed inflationary pressures in 2011 than in 2010.
However, improved domestic food prices and an efficient pricing regime for petroleum prices, and a relatively stable cedi could help keep inflation within the range of 10 per cent and 12 per cent this year.
“Inflation is likely to close 2011 within the range of 10 per cent and 12 per cent. There will be mild inflationary pressures this year compared to 2010. Potential increases in fiscal spending, stronger crude oil prices in line with the recovery of the global economy, and the recovery of consumer demand will be the main drivers on the pricing front,” Mr Akligoh said.
Mr Akligoh was, however, optimistic about Ghana’s growth prospects in 2011, saying the trend of growth for the non-oil sector indicated that non-oil GDP could increase to the region of seven per cent and eight per cent, which if supported by the oil sector and favourable macroeconomic policies, should facilitate an overall GDP growth of about 13 per cent.
On his part Sylvester Bagoro, Policy Analyst of the Centre for Budget Advocacy of Integrated Social Development Centre (ISODEC), said he expected the cedi to be under pressure in 2011.
“I foresee an appreciation of the cedi due to the demand for oil products,” he said, adding that such an appreciation will make imports cheaper while hurting Ghanaian exports.
Mr Bagoro said the increased imports would lead to the displacement of local producers and this posed a challenge in the provision of jobs in 2011.
Besides, further hikes in petroleum prices in line with global demand could add a strain on government’s spending.
He said job creation might only be successful in the oil, agriculture and the construction sectors.
“Other sectors may face difficulties in job creation,” he said.
Mr Bagoro said government needed to use its purchasing power to create market for local producers in order for them to remain in business.
He said he did not expect much change in interest rates for the year, adding that key sectors such as agriculture considered risky, must have insurance cover to instil confidence in the banking sector to lend to that sector.
On the other hand, he said, inflation would remain stable after the price rise due to the hikes in petroleum products.
“Single digit may not be feasible by the end of the year due primarily to petroleum products and effects of wages and salaries,” he said.
“I want government to use its purchasing power to create a market for Ghanaian businesses. Government needs to inspire confidence in the minds of Ghanaians in terms of job creation for the youth,” Mr Bagoro said.