Business World speaks to three independent analysts: Dr. Sam Mensah, Executive Chairman of SEM Group Limited, Nana Sarfo , Head of Corporate Finance of Fidelity Bank and Nana Amoto Mensah , Head of Corporate Finance, Ecobank Development Corporation (EDC),on the economic outlook for 2010.
Although government in its budget is targeting an inflation rate of 9.2 per cent, independent analysts are predicting an end-of-year inflation in the region of 12 per cent. Dr. Sam Mensah is the Executive Chairman of SEM Group Limited and is forecasting an end of year inflation of between 11 and 12 per cent.
“Ghana’s recent single inflation history is out of the norm and she needs long-term structural changes in the economy [especially in food production] to achieve single-digit inflation,” he says of government 9.5 per cent inflation target.
Again, Dr. Mensah forecasts that oil prices, which significantly impact inflation, are likely to go up in the second half of the year as the developed countries come out of recession. Again, China’s large appetite for oil may also push the prices up.
Nana Amoto Mensah is the Head of Corporate Finance of Ecobank Development Corporation and his estimation is close to Dr. Mensah; He is forecasting an inflation rate of between 12 and 14 per cent,
Nana Amoto Mensah, reasons that considering the underlining philosophy Ghana has followed in the last few years – inflation targeting has not changed fundamentally. He believes government will still continue its consolidation of stabilisation in the first half of the year and push aggressive development in the second half of the year.
On the other hand, Nana Sarfo, Head of Corporate Finance of Fidelity Bank, forecasts a range of 15 and 17 per cent. Sarfo argues that government’s expenditure will impact inflation: “the expectations are high; [government] has to deliver by half year.” Again, oil revenues that may fund government expenditure may not be fully deployed.
On interest rates, Dr. Mensah is quite upbeat about the outlook.
“The picture for interest rates in the later half of 2010, looks pretty good; I see the 91-day Treasury bill, trending down to 15 per cent by the end of the year, “he said of interest rates. He explained that, the disinflation process will have a downward influence on the interest rates.
“If government is able to bring its fiscal appetite down, interest rates will hold down. The current risk that will influence the value of the cedi is oil prices; if we see a significant rise in oil prices, the cedi is going to come under pressure,” he added.
Nana Sarfo has a contrary view on interest rates: he thinks government anticipated expenditure will drive interest rates to the region of the 20s.
All the analysts Business World spoke to were unanimous on the Gross National Product (GNP); they all predicted a rate of between 5 and 6 per cent.
They also identified the agriculture, banking and the oil sectors as the facets of the economy that will see the most activity. On the banking sector, some of the analysts said the banks that have recapitalized, will be forced to deploy their capital, also agriculture made it to the top of the predictions because of significant investment have been made in that sector. The agricultural sector has also been designated as a priority sector by government.
“Once we begin to mine oil, it is going to be the biggest thing; but it may not be on the scale that people expect. Oil will lead the way, but for other sectors to respond the financial sector must grow,” Nana Amoto Mensah said of the oil industry.
Again, most analysts are forecasting growth in all the sectors of the economy.
“I do not expect a decline in any sector; I expect marginal growth in some, but no declines in any sector,” Sarfo said.