Bank of Ghana (BoG) has cut its policy rate by 150 basis points to 14.5% over fears the coronavirus outbreak could slowdown economic growth.
In a release after a meeting of the Monetary Policy Committee, the bank said its initial assessment of the domestic economy showed that the pandemic could impact Ghana through a number of channels.
First, the dampened global demand could significantly impact Ghana's crude oil export earnings with major implications for foreign inflows and tax revenues.
There is also a likelihood of export restrictions from advanced economies and other emerging market economies, which could create a supply chain shortages for Ghanaian businesses, with significant impact on imports of intermediate and capital goods, as well as consumer goods.
This is expected to negatively affect inputs in the domestic production channels with severe consequences for growth and tax revenues, which could become more pronounced by the second or third quarter.
In addition, crude oil prices have declined sharply to historically low levels, and already creating negative shocks on exports, albeit with some offsetting effects from rising gold and cocoa prices.
“In the assessment of the Bank, the negative impact of COVID-19 on exports, imports, taxes, and foreign exchange receipts will culminate in a slowdown in economic activity,” the bank said.
The Bank said GDP growth is forecasted to decline to 5.0 percent in a baseline scenario.
“In the worst case scenario, GDP growth estimates could be halved to about 2.5 percent in 2020. These assessments are preliminary as the situation is fluid and the degree of uncertainty concerning the outbreak is very high. This means that there is a likelihood that these assessments could change rapidly.
“The Bank of Ghana is closely monitoring developments as regards the impact of COVID-19 on the domestic economy, and will not hesitate to convene an emergency meeting to deliberate on other measures, if required,” the Bank Added.