Energy Crisis Lowers Business Optimism

The latest business surveys conducted by the Central Bank between March and April in 2013 revealed that businesses and consumers sentiments have weakened in the country. According to the survey by the Central Bank, the Business Confidence Index declined significantly to 99.0 in March 2013, from 104.1 in December 2012. This was partly due to the energy crisis which in turn lowered business optimism about growth prospects and heightened inflation expectations over the medium-term horizon. Similarly, the Consumer Confidence Index also fell to 96.1 in April, from 105.0 in January 2013. The Bank’s Composite Index of Economic Activity (CIEA), which measures the pace of economic activity, contracted by 0.6 percent in March 2013, against 14.8 percent growth in March 2012. All the components of the CIEA recorded negative yearly growth rates with the exception of Tourist Arrivals, Domestic VAT and DMBs’ credit to the private sector. Aside with the energy crisis, many have also attributed the weakening of businesses and consumers sentiments to the election petition case in the Supreme Court which has served as a disincentive for investors who are willing to invest in the country. Business sentiments expressed by most people say they cannot predict the outcome of the case; hence there is the need to hold back investment plans in the medium to long term. Economy Times has learnt that most institutional and corporate investors in the country have hold back their investment programs in the wake of the court case at the Supreme Court. Investor confidence in the economy have continued to deepen as government’s three-year fixed rate bonds was heavily oversubscribed by almost 100 percent a fortnight ago. The Central Bank issued a 3 year fixed rate bond at a coupon rate of 19.24 to raise an amount of GHC 400 million but received bids of GHC786 million. The Central Bank took only GHC489.4 million. More than 80 percent of the bids received by the Central Bank were coming from offshore investors. The proceeds of the bonds were to support government budget, as well as rollover maturing debt.