The Bank of Ghana has expressed fears that the threat from the Coronavirus disease (COVID-19) will collapse growth in the economy to 2.5 per cent in 2020.
The Governor of the Central Bank, Dr Ernest Addison, said in a statement issued Wednesday, that the 2.5 per cent growth rate would be a “worst case scenario” impact from the challenges of the disease on the local economy.
The Governor, however, said a preliminary baseline assessment of the impact of the disease showed that the economy could grow at five per cent this year as a result of the COVID-19.
In the 2020 budget, the economy was projected to grow at 6.8 per cent.
Dr Addison said the COVID scourge would result in shortfalls in imports, exports, taxes and foreign exchange, “which will culminate in slowdown in economic activity.”
The Bank of Ghana also announced that, it has reduced its benchmark policy rate by 150 basis points as its first response to the strain that the Coronavirus disease (COVID-19) is imposing on the economy. The policy rate determines the rate at which commercial banks determine interest rates on loans.
With this cut, it is expected that interest rates on commercial loans will also drop. The bank reduced the rate, which is the benchmark for inter bank lending, from 16 per cent to 14 per cent on Wednesday.
The statement followed the conclusion of the 93rd MPC meeting which reviewed activities in the economy and the impact of global developments on the local front.
Unlike before when the committee’s meetings were followed by press conferences, the bank issued a statement in compliance with the directive to avoid social gatherings in the wake of the COVID-19 scourge.
The reduction in the rate is the first since November 2018 and is expected to combine with other factors to make cost of credit cheaper.