Middle East crisis has raised financial stability concerns – Dr Asiama
Governor Asiama
Governor of the Bank of Ghana (BoG), Dr Johnson Asiama has said that the conflict in the Middle East has disrupted global supply chains, increased crude oil market volatility, raised financial stability concerns, and heightened global uncertainty.
Although global headline inflation has been on a downward trajectory, he said, the recent surge in oil prices has renewed inflation concerns and may compel some central banks to reassess their monetary policy stance.
Consequently, global financing conditions, which remain broadly accommodative, could tighten in the near term, Dr Asiama said during the 129th Monetary Policy Committee (MPC) press conference in Accra on Wednesday, March 18.
He said that, depending on the intensity and duration of the conflict, these developments could weigh on the global economic outlook.
On the domestic front, Dr Asiama said that provisional data released by the Ghana Statistical Service indicated that real GDP grew by 6.0 percent in 2025, compared with 5.8 percent in 2024. Non-oil GDP growth accelerated to 7.6 percent from 6.1 percent over the same period, largely driven by the services and agriculture sectors.
The Bank’s high frequency real sector indicators pointed to a sustained pickup in economic activity. The real Composite Index of Economic Activity recorded an annual growth of 8.4 percent in January 2026 compared to 6.0 percent for the corresponding period of 2025.
Increased credit to the private sector by banks, industrial production, international trade activities, and consumption of goods and services by households and firms contributed to the improvement in economic activity.
The Bank’s confidence surveys conducted in February 2026, reflected positive consumer and business sentiments. Consumer confidence improved on account of easing inflationary pressures and optimism about future economic conditions.
Similarly, business confidence strengthened on the back of realisation of operational targets and optimism about industry prospects amid improving macroeconomic conditions.
Headline inflation declined further to 3.3 percent in February 2026, from 5.4 percent in December 2025, driven by both food and non-food inflation. Core inflation, which excludes energy and utility items, also declined, indicating muted underlying price pressures.
Additionally, inflation expectations among consumers, businesses and the financial sector remained broadly anchored. The strong disinflation during the past 14 months has been supported by the relatively tight monetary policy stance, cedi appreciation, and improved food supply conditions.
Growth in monetary aggregates continued to slow in February 2026, reflecting the relatively tight monetary policy stance. Reserve money contracted by 0.5 percent yearon-year in February, compared to 68.8 percent growth a year earlier. Also, broad money supply growth eased to 16.0 percent, from 33.1 percent over the same period.
Interest rates on short-term bills declined sharply in the first two months of 2026 on the back of easing inflation expectations and fiscal restraint. Yield on the benchmark instrument, the 91-day Treasury bill, declined sharply in February.
Also, average bank lending rates declined to 19.2 percent in February 2026, from 30.1 percent same month last year, leading to a gradual increase in private sector credit.
Provisional data showed that fiscal outturn for the period January to December 2025 was marked by constrained government spending due to commitment control measures amid shortfalls in revenue. In the review period, the overall fiscal deficit on commitment basis was 1.0 percent of GDP, below the budget target deficit of 2.8 percent. On commitment basis, the primary balance recorded a surplus of 2.6 percent of GDP, exceeding the target of 1.5 percent. At the end of December 2025, the provisional public debt stock was equivalent to 45.3 percent of GDP, down from 61.8 percent at the end of December 2024.
The Bank’s latest forecast suggested that headline inflation will remain within the medium-term target. Upside risks to the inflation outlook include the likely passthrough of higher crude oil prices and escalating geopolitical tensions.
“In the view of the Committee, despite these upside risks to the inflation profile, the favourable domestic macroeconomic conditions and high prevailing real interest rates provide scope to ease the policy rate further.”
Source: 3news.com by Laud Nartey
