The latest MPC report: What's the bottom line?
I run a business and after reading the latest MPC Press Release - Nov. 2014, I need more answers and clarifications.
Advertisement
Upbeat Consumers and Businesses
The points made in point eight of the statement that “consumers were upbeat about the general economic conditions” and that “business confidence rebounded in the third quarter” baffle me a bit since the outlook for the value of the incomes and household budgets and thus for real turnover for businesses are weak. Where can one access a copy of the Composite Index of Economic Activity which is referenced as the evidence for the confidence?
Who Cannot Afford to Borrow
Reading from point nine to fifteen I kept asking what the good news is for SMEs if the cost of credit for consumers and small business remains prohibitive, if prices are up and rising in line with the fact that money supply (M2+) grew at twice the prior year’s rate, and if though banks may lend more, their lending will likely remain skewed to big businesses?
Good News is Bad News for The Public Purse
I reflected on points three to five and seventeen to nineteen asking myself why the government's financing gap should expand further when the MPC Statement touted a brighter outlook for growth in Africa, rising commodity prices and lower crude oil prices and just felt baffled. For an economy that imports more hydrocarbons than we export, lower prices should be a blessing.
... and The Economy Moves on Sluggishly
The net effect of the statement by the MPC suggests slower growth, as indicated, so it would have been useful information to be told in what the confidence of consumers and business reside.
Curious Conclusions
My take on the summary of the MPC is that it is schizophrenic, because I read:
• defeatism in points twenty-seven and thirty from the conclusions that we will not be able to sell more exports and felt uncomfortable with the unspoken hints that cedi stability is the central focus. This suggests that there is no plan for a sustained recovery in the value of the cedi vis-a-vis major currencies at precisely the finest opportunity to restore confidence and investment across the economy by anchoring and building on a strengthening cedi.
• 'irrational exuberance' in point twenty-eight that the completed infrastructure for gas production may have some near term impact in the energy sector when in fact the challenges going forward are more likely to persist in the short and medium term and income from higher oil output will be offset by falling crude oil prices unless government continues to reign in growth by pricing gas expensively.
• denial in points twenty-eight and thirty that fiscal pressures are not described as important risks though the effects when the 3-year cedi bond auctioned in 2012 and other forex-denominated loans will start to come due in 2015.
• confusion that somehow the maintenance of a tight monetary policy stance will couple snugly with expected strong private sector credit when more money is made to borrowers available at a higher cost.
There may be some things to cheer going into 2015 but I am not clear about what they will be for consumers and SMEs. Have a read and lets have a chat if you will.
You can reach the author at [email protected]
