Republic Bank Limited
26
Chairman’sReview
2
Executive
Depressed prices of these main exports continued through 2015,
resulting in an 18.7% decline in the country’s export revenue to
August 2015 compared with the same period in 2014. The impact
of this decline, while mitigated somewhat by a decline in import
levels, still resulted in Ghana’s foreign reserves declining from
US$5,833.2 million in October 2014 to US$4,594 million in August
2015, equivalent to 2.9 months of import cover.
Despite these challenges, Ghana has been making progress in
curbing its fiscal deficit as part of the IMF’s Extended Credit Facility
(ECF) programme. Consolidation through the first seven months
of 2015 resulted in a fiscal deficit of 3% of GDP, within the
programme’s target of 4%. Following the first review of Ghana’s
performance under the ECF, the IMF team found that while
inflation remained higher than expected, averaging 16.9% from
October 2014 to August 2015, the programme was on track to
achieving its goals. Buoyed by these positive comments from the
IMF, the cedi, which had been declining through the first half of
2015, appreciated by 25.5% against the US dollar in July 2015
before falling by 14.8% in August 2015. The Bank of Ghana’s
Monetary Policy Committee, in an attempt to curb inflation and
reduce the volatility of the exchange rate of the cedi, increased its
benchmark rate from 19% to 25% during the period October 2014
to September 2015.
The Ghanaian economy is expected to grow by 3.5% in 2015. The
country’s challenges are unlikely to improve before the next six
months, as harnessing its power generation capabilities will take
some time and commodity prices are expected to remain depressed.
Grenada
The IMF expects economic activity in Grenada to expand by 1.6%
in 2015, following on the 2.6% growth which occurred in 2014.
The performance in 2015 was based primarily on continued
growth in the tourism and agriculture sectors. Nonetheless, with
unemployment still high, weak domestic demand restricted growth
during 2015. Low oil prices are expected to contribute to a reduced
current account deficit in 2015, while the fiscal deficit is expected
to fall to 2.4% for 2015 from 4.9% in 2014.
The country’s efforts to restructure its debt have achieved some
success with private bondholders agreeing to take a 50% haircut
(equal to US$131 million) on debt totaling US$262 million. The
resultant cut in debt is projected to be equivalent to 13% of 2017
GDP. However, with the bulk of Grenada’s debt held by multilateral
organizations such as the IMF and Caribbean Development Bank,
which are not subject to restructuring, the country is expected to
contend with high debt rates for some time. Total debt is estimated
to reach 97% of GDP in 2015, down slightly from 105% in the
previous year.
In the second quarter of 2015, the IMF conducted its second review
of Grenada under the Extended Credit Facility Arrangement which
began in 2014 and expressed satisfaction with the country’s progress
thus far, indicating that the overall programme implementation
remains solid. Major reforms of the fiscal policy framework to
anchor debt sustainability have been completed, albeit with some
delay, including new fiscal responsibility legislation and the reform
of the tax incentive regime to eliminate discretion.
The economy is projected to record a slightly improved pace of 2%
in 2016, due to growth in both tourism and agriculture. Tourism is
expected to benefit from the continued growth of the US economy
and other key markets such as the UK. The growth in key agriculture
sub-sectors in 2014 and 2015 augurs well for the sector’s prospects
in 2016. There are, however, significant downside risks to this
forecast. Public debt remains high and economic growth has fallen
short in some of Grenada’s key tourism markets.
Guyana
In its 2015 budget statement, the Government of Guyana estimated
3.4% growth for the economy. This follows an expansion of 3.8%
in 2014 and was achieved in an environment of weak prices for the
country’s mining products and a high level of political uncertainty in
the lead up to the May 2015 General Elections.
During the year, the country was also confronted by notable
challenges within the agriculture sector, especially in the sugar
industry which continues to be plagued by labour, financial and
management issues which all combined to have a negative impact
on sugar output. Despite the fall in revenue from the mining sector
which resulted from declines in output and weak international
prices, the Government is projecting the fiscal deficit to fall to 2.8%
of GDP from 5.7% in 2014.
The IMF projects economic activity to expand by 4.4% in 2016 on
the basis of the impetus provided by the agriculture and services
sectors. This may, however, prove challenging given the number of
