According to the, “the recently released GDP data from the Ghana Statistical Service showed that the economy expanded by 9 percent, year-on-year basis in Quarter two 17, relative to 1.1 percent in the same period last year. The stronger growth outcome was largely driven by the industry sector followed by the services sector.”
It added that “looking ahead, growth should remain elevated as further oil production comes on stream.”
Earlier on, Fitch forecasted a 6.3 percent growth rate for 2017 saying “We believe that increasing oil production, due to the coming online of the TEN oilfield and gradually recovering global commodity prices will continue to boost export production and demand respectively. On the back of this, we expect that real GDP growth will reach 6.3 percent in 2017, increasing considerably from the 3.8 percent for 2016.”
The report further stated that it expect the monetary policy easing to trigger a reduction in banks' cost of funds as the average lending rate saw a drop from 31.3 percent in April 2017 to 29.8 percent in May 2017. “While a lower cost of funds could trim the base rates of commercial banks, the persistently high Non-Performing Loans ratio (20.9 percent as at July 2017) remains a key risk to growth of private sector credit. The high NPLs for Ghana's banking sector would continue to limit the expected decline in the risk premium charged by banks”, it noted
On the recapitalization of the banking industry, the report noted that the move is expected to help boost the overall capitalization of the banking sector. This may however, constrain banks' ability to lend or acquire interest-earning liquid assets resulting in low demand for Government of Ghana debts.
It also said demand for treasury securities is likely to remain weak in the last quarter of 2017 unless yields continue to recover to boost real interest rates to levels that are acceptable to investors.
Fixed Income Market
On the fixed income market, the report said trading activities were not robust last quarter compared to the same period in 2016. It emphasized that investors are gradually shifting to the stock market as they are weary of the low yields offered on the secondary market, adding, this situation has contributed to a weak demand for treasury securities over the period.
The report stated that the Equity Market delivered robust gains in the third quarter.
The benchmark, Ghana Stock Exchange Composite Index (GSE-CI) recorded a steady rise to end the third quarter of 2017 at a year-to-date return of 31 percent. Gains were however fuelled by positive investor sentiments coupled with the falling fixed income yields.
The Banking sector continued to be the strongest performer, generating gains of 21 percent year-on-year against all other sectors which generated gains of 10 percent year-on-year.