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Bank of Ghana
Monetary Policy Report
World Economic Outlook and
External Developments
Volume 4: No.2/2012
April 2012
Section I: World Economic Outlook
4.1.1 Global GDP growth
Global GDP growth slowed in the last quarter of 2011, as an upturn in the US economy was offset by outright
declines in GDP in the euro-zone, Japan and the UK. Since then, purchasing managers’ indices and measures of
consumption sentiments indicates a pick-up in the first quarter of this year.
After repeated downgrades since early 2011, global researchers have edged up their global growth forecasts in
2012. This reflects modest but widespread upgrades among industrial countries arising from better-thanexpected activity data. In PPP-weighted terms, Citigroup Global Markets expects global GDP to rise by 3.1 per
cent in 2012 (up from 3%), by 3.5 per cent in 2013 and 3.9 per cent in 2014.
Selected Economies: Economic Forecast Overview (%), 2011-2013F
Economy/Region
World
Advanced economies
USA
Japan
Euro Area
Emerging Markets
China
India
Russia
Brazil
South Africa
Ghana*
GDP Growth
Forecasts
2011
2012
2013
3.7
3.1
3.5
1.3
0.8
1.2
1.7
2.1
2.0
-0.7
1.5
1.4
1.5
-1.2
-0.2
6.1
5.3
5.9
9.2
8.4
8.5
8.9
7.0
7.5
4.3
3.5
4.0
2.7
3.3
4.5
3.1
2.9
3.8
13.6
9.4
8.0
Source: Citi Investment Research & Analysis
CPI Inflation
2011
4.2
2.3
2.5
-0.3
2.7
6.1
5.4
9.0
8.5
6.6
5.0
8.7
2012
3.5
1.9
2.1
0.0
2.5
5.1
3.3
7.0
5.5
5.5
6.0
8.5
* Source: GSS, National Budget
Short-Term Interest Rates
2013
3.4
1.6
1.8
0.2
1.9
5.2
3.7
6.5
6.8
5.5
5.4
...
2.65
0.76
0.25
0.10
1.19
6.04
3.22
8.19
8.00
11.71
5.50
...
2012
2.58
0.62
0.25
0.10
0.81
5.70
3.50
7.63
7.50
9.31
5.75
...
2013
2.63
0.57
0.25
0.10
0.50
5.84
3.63
7.50
6.00
10.29
7.25
...
Outlook:
According to the IMF, ‘recent improvements are still very fragile and downside risks are still very large’. The
reasons for caution are several including:
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Global economic improvement has started off from a very low base. In the euro-zone, the latest business
surveys still point to stagnant output at best.

Fiscal policy in advanced economies is set to be tightened by a further 1 per cent of GDP in 2012,
suggesting that growth prospects may deteriorate later in the year.

Notwithstanding the positive market response to the European Central Bank’s Long Term Refinancing
Operation (LTRO), the euro-zone crisis was far from over.
4.1.2
Global inflation
Headline inflation is on a downward trend in all major advanced economies. It peaked at 3.3 per cent in
September 2011 and has since slowed to 2.8 per cent in January 2012. Going forward, it is expected to fall
significantly further in the first half of this year as commodity price
inflation eases after the previous year’s rebound.
FAO Food Price Index (Jan. 2011 - Mar. 2012)
240
235
230
In many emerging market and developing economies, inflation
225
has declined more steeply in the past few months. This has
215
220
resulted from a fall in energy and food price inflation, both of
210
which have a high share in the CPI basket of most emerging
200
economies.
205
195
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
2011
2012
Outlook:
Global inflation is poised to drop in the first half of this year. In advanced economies, ample economic slack and
well-anchored inflation expectations will keep inflation pressures subdued, to about 1 per cent from a peak of 2¾
per cent in 2011, as the effects of last year’s higher commodity prices wane. In emerging and developing
economies, as both growth and food price inflation slow, headline is expected at 6¼ per cent during 2012, down
from over 7¼ per cent in 2011.
4.1.3 Global financial stability
The main source of risks to global financial stability continues to be the euro area sovereign debt crisis. There
has been a significant improvement in global financial-market sentiment since the beginning of 2012 reflecting
the combination of three things:
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US data in 2011:H2 turned out better than market expectations; the beginning of 2012 has shown more
of the same, with the US experiencing a steady, albeit unspectacular, recovery.

Market fears of (i) a US double-dip and (ii) hard landing for China did not both materialise.

The actions of ECB in providing ample liquidity through a three-year facility (LTRO) in December proved
very effective, helping to pull the euro area back from the brink and removing previous worries about the
ability of European banks to finance themselves in the face of sizeable redemptions.
4.2 Survey of Monetary Policy Stance of Selected Central Banks
The period since the last MPC meeting to date (20 February – 07 April, 2012) witnessed 63 interest rate
decisions from central banks around the world. Of those decisions, only 3 hiked their policy rates while 16
reviewed rates downward with the 44 majority staying put.
Almost all central banks that eased or stayed put made reference to the downside risks posed by the ongoing
Euro area debt crisis and its possible contagion on their financial markets. Those that hiked (all in emerging and
developing economies group) cited inflation concerns and strong economic growth.
The key trend was a continuation of the increasing bias towards easing, as the external risks and slowing global
growth have put pressure on central banks to put in place preventative measures to support their economies.
Measures other than interest rate moves

Peoples Bank of China (PBOC) reduced the required reserve ratio (RRR) by 50bps to an average of
20.5 per cent for large banks and 18.5 per cent for small banks. The move was expected to improve
liquidity by as much as 400 billion Yuan in the financial system. The move also marked a shift in the
policy bias to loosening, with the PBOC previously using open market operations to adjust liquidity, in
contrast to the high profile RRR. The Reserve Bank of India also cut the RRR for banks by 75 basis
points to 4.75 per cent to ease tight liquidity. Other central banks that eased RRR were Ukraine and
Egypt.

The ECB completed its second LTRO, with 529.5 billion Euros allotted to 800 banks.
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Bank of Japan announced 2 trillion yen of enhancements to "the Growth-Supporting Funding Facility"
(GSFF) resulting in the GSFF expanding to 5.5 trillion yen.
4.3
Commodities markets
Most commodity prices started the year positively, but in March commodity prices generally declined, in response
to weaker global demand. The unwinding in March has not fully eroded the gains in January and February.
Consequently, the prices of Ghana’s three core commodities
registered net increases in the first quarter.
4.3.1
Oil
Oil prices have held up in recent months, largely because of
supply developments arising from geopolitical risks. These risks
are expected to remain elevated for some time, and oil prices will
ease only marginally in 2012 despite less favourable prospects
for global activity.
140
130
crude closed December 2011 at $108.53 per barrel, indicating a
growth of 15.7 per cent from the end-2010 price of $94.28 per
barrel. In 2012:Q1, oil prices rose steadily from $108.53 per
110
100
Jan-Dec' 11
90
80
70
30-05
06-12
13-19
20-26
27-02
03-09
10-16
17-23
24-02
03-09
10-16
17-23
24-30
31-06
07-13
14-20
21-27
28-04
05-11
12-18
19-25
26-01
02-08
09-15
16-22
22-29
30-06
07-13
14-20
21-27
28-03
04-10
11-17
18-24
25-31
01-07
08-14
15-21
22-28
29 - 05
06-12
13-19
20-26
27-02
03-9
10 - 16
17-23
24-30
01-07
08-14
15-21
22-28
The average weekly price per barrel of the benchmark Brent
Jan-Mar 2012
120
$ per bbl.
Price developments:
Developments in the price of Brent crude:
(Jan-Dec 2011 & Jan-Mar 2012)
150
Jan Feb
Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
barrel (end-December 2011) to $124.71 at the end of March. In year-on-year terms, the end-March 2012 price
represented a growth of 5.5 per cent.
Outlook:
While the deteriorating growth picture for 2012 has implications for oil demand, overall demand growth is still
expected as expansion in non-OECD countries offsets declines within the OECD.
4.3.2 Cocoa
Although demand for commodities is generally expected to pick up in 2012:H2, European demand for cocoa is
expected to remain weak and will cap the upside near-term. On the supply side, favourable weather conditions
are expected to boost output. Consequently, the near-term outlook for cocoa price remains bearish.
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In Ghana, the 2011/2012 main crop season purchases commenced on 27 October. Cumulative purchases from
that date to the week ending 29 March 2012 (23 weeks) came in at 715,675 tonnes, which was 5.1 per cent
lower in year-on-year terms in comparison with the first twenty-three weeks of the 2010/2011 main season.
Whereas purchases in the first twenty-three
Ghana: Cumulative Cocoa Purchases (tonnes)
Crop Year
weeks constituted 81.3 per cent of projected Season
purchases for the season, the purchases in the MAIN Actual (23 weeks)
Act./Proj. for season
twenty-three weeks of the last season constituted
82.3 per cent of actual purchases for that season.
2010/11
754,264
916,810
82.3
Share (%)
2011/12
715,676
880,000
81.3
Change
(%)
-5.1
-4.0
Price developments
The London International Financial Futures Exchange (LIFFE) weekly average price in the 2012 year-opening
was £1,865.5 per metric tonne. For the first quarter of 2012, the average weekly LIFFE price was £1,489 per
metric tonne, compared with an average of £2,130.5 per metric tonne over the corresponding period in 2011.
2,600
fluctuations but, in trend, went up by 4.1 per cent to £1,441
2,400
per metric tonne, which represented a decline of 27 per cent
2,200
GBP / Tonne
in year-on-year terms.
2,000
1,600
In terms of the CSCE US$ price however, the end-March
1,400
2012 price was $2,176 per metric tonne and represented a
1,200
weakening by 28.6 per cent in year-on-year terms.
Jan-Dec' 11
1,800
Jan-Mar 2012
30-05
06-12
13-19
20-26
27-02
03-09
10-16
17-23
24-02
03-09
10-16
17-23
24-30
31-06
07-13
14-20
21-27
28-04
05-11
12-18
19-25
26-01
02-08
09-15
16-22
22-29
30-06
07-13
14-20
21-27
28-03
04-10
11-17
18-24
25-31
01-07
08-14
15-21
22-28
29 - 05
06-12
13-19
20-26
27-02
03-9
10 - 16
17-23
24-30
01-07
08-14
15-21
22-28
In 2012:Q1, the LIFFE price development witnessed some
Developments in LIFFE cocoa prices:
(Jan-Dec 2011 & Jan-Mar 2012)
Jan Feb Mar
Apr May
Jun
Jul
Aug Sep Oct Nov
Dec
4.3.3 Gold
Market analysts identified the main factors driving the bullish sentiments for gold as follows:

perceived safe haven given concerns about global imbalances and another systemic failures in the
financial system;

hedge against inflation; an increasing role within reserves, which may also reflect the impact of
quantitative easing in undermining currencies; and

passive diversification away from the US dollar.
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Over the January – December 2011 period, gold spot prices rallied 13.2 per cent from $1,384.73 to $1,587 per
ounce, with some price fluctuations over the period. The maxmin prices were $1,842.77 per ounce (third week of August) and
Developments in the price of Gold:
(Jan-Dec 2011 & Jan-Mar 2012)
2,200
$1,337.79 per ounce (last week of January).
2,100
2,000
The average weekly price over the 2012:Q1 period was
$1,686.5 per ounce, compared with $1,388.9 per ounce over
$ per f/oz
1,900
1,700
1,600
1,400
the price of gold rallied by 5.6 per cent to $1,676.6 per ounce.
1,200
4.4
Currencies Markets
4.4.1
Movements of selected currencies
Jan-Dec'11
1,500
the corresponding period in 2011. In the first quarter of 2012,
1,300
30-05
06-12
13-19
20-26
27-02
03-09
10-16
17-23
24-02
03-09
10-16
17-23
24-30
31-06
07-13
14-20
21-27
28-04
05-11
12-18
19-25
26-01
02-08
09-15
16-22
22-29
30-06
07-13
14-20
21-27
28-03
04-10
11-17
18-24
25-31
01-07
08-14
15-21
22-28
29 - 05
06-12
13-19
20-26
27-02
03-9
10 - 16
17-23
24-30
01-07
08-14
15-21
22-28
This represented a year-on-year growth of 17.4 per cent.
Jan-Mar 2012
1,800
Jan Feb Mar Apr May Jun
Jul
Aug Sep Oct Nov Dec
Emerging market currencies broadly strengthened against the US dollar in 2012:Q1, as compared to the general
weakening witnessed in the last quarter of 2011. One exception to the general trend in 2011:Q4 was the Chinese
yuan which is pegged to a basket of currencies.
MOVEMENTS OF SELECTED CURRENCIES AGAINST THE US DOLLAR (%)
Pt-to-pt. (%)
Advanced Economies
Euro
Pound
Yen
Euro zone
UK
Japan
Jan
Feb
Mar
Q1 (Cum.)
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
1.0
2.2
2.7
5.8
3.1
-0.8
0.4
-0.9
0.4
-4.1
-0.1
-1.3
-2.9
1.2
2.1
0.2
3.5
1.3
-0.1
-0.8
-0.4
1.2
-3.6
-0.0
0.2
-1.3
0.7
0.1
1.1
2.0
-1.9
2.6
0.8
1.5
2.9
0.2
0.2
-1.2
-0.3
Jan
Feb
Mar
Q1 (Cum.)
-2.0
2.6
-0.2
0.4
-0.4
1.9
0.1
1.6
1.1
-2.0
-4.8
-5.7
Monetary Policy Report No. 4 Vol.2/2012
Yuan
China
2011
2012
Emerging Market & Ghana
Rupee
Rand
Gh. Cedi
India
S. Africa
Ghana
0.8
0.3
0.2
1.3
0.6
0.5
0.3
0.3
0.9
0.2
0.3
0.2
0.1
-0.8
0.1
1.0
0.4
1.3
-1.2
0.2
0.9
-2.1
-4.8
-3.1
-3.0
-3.2
-1.7
-3.4
4.1
-1.0
2.6
-1.9
0.9
0.0
-4.4
-6.1
-5.0
-2.5
-0.4
-1.9
0.3
-0.4
-2.0
0.4
-0.4
-0.2
-0.1
-0.4
-0.7
-0.7
-0.6
-0.6
0.5
0.3
-0.2
0.6
2.7
3.7
-2.3
4.1
2.4
4.8
0.4
7.6
-5.9
-1.6
-0.9
-8.3
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Section II: External sector developments
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4.5 Local foreign exchange market
4.5.1 Bilateral and Effective Bilateral movements of the Ghana cedi
Developments in the nominal bilateral exchange rates of the cedi against the three core currencies – the US
dollar, the pound sterling and the euro – show that in 2012:Q1, the cedi cumulatively depreciated by 8.3, 9.2 and
8.9 per cent against the US dollar, the pound sterling and the euro respectively compared to depreciation rates of
2, 7.9 and 10.5 per cent in the corresponding period in 2011.
BILATERAL MOVEMENT OF THE CEDI AGAINST CORE CURRENCIES
Monthy Changes (%)
Year-on-year changes (%)
Month Gh¢/$
Gh¢/£
Gh¢/€ Gh¢/$
Gh¢/£
Gh¢/€ Gh¢/$
Gh¢/£
Gh¢/€
2011
Jan-11 1.5024 2.3473 2.0485
-1.9
-4.0
-5.1
-5.0
-1.6
-2.2
Feb-11 1.4975 2.4048 2.0631
0.3
-2.4
-0.7
-4.7
-9.2
-6.3
Mar-11 1.5031 2.4419 2.1643
-0.4
-1.5
-4.7
-5.7
-12.8
-11.4
2012
Jan-12 1.6475 2.6233 2.1781
-5.9
-4.0
-3.4
-8.8
-10.5
-6.0
Feb-12 1.6735 2.6764 2.2736
-1.6
-2.0
-4.2
-10.5
-10.1
-9.3
Mar-12 1.6888 2.7646 2.3025
-0.9
-3.2
-1.3
-11.0
-11.7
-6.0
Memorandum
Point-to-point Qtly movement (%)
Period Cumulative Movement (%)
Gh¢/$
Gh¢/£ Gh¢€
Gh¢/$
Gh¢/£
Gh¢€
Mar-11
Mar-11
-2.0
-7.7
-10.2
-2.0
-7.9
-10.5
Mar-12
Mar-12
-8.2
-8.9
-8.6
-8.3
-9.2
-8.9
Nominal Effective Exchange Rates (NEERs)
Trade Weighted Index (TWI)
The major (or core) Trade Weighted Index (TWI) is nominal index measure of the value (January 2002=100) of
the cedi relative to the currencies of Ghana’s top trading currencies combined – the euro, the pound and the
dollar. It is thus a nominal effective index.
Nominal TWI and FXTWI (Jan-Mar, 2011 and 2012)
2011
2012
Dec-10
Mar-11
Change (%)
Dec-11
Mar-12
Change (%)
TWI
37.57
35.24
-2.3
35.84
32.74
-3.1
FXTWI
47.60
46.75
-0.9
46.59
41.85
-4.7
For the first quarter of 2012, the cedi depreciated by 3.1 percentage points in trade-weighted terms. This
compares with similar depreciation of 2.3 percentage points over the corresponding period in 2011. The March
2012 value of the index of 32.7 was 0.6 of a percentage point below the quarterly trend value.
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Core TWI for the cedi
(Jan. 2005 - Mar. 2012)
T. 1 9 5 7
Core FXTWI for the cedi
(Jan. 2005 - Mar. 2012)
80
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60
70
55
3-mth M.A.
3-mth M.A.
Percent
Percent
65
50
60
45
55
TWI
45
30
40
FXTWI
Ja
nM 05
ay
-0
Se 5
p0
Ja 5
nM 06
ay
-0
Se 6
p0
Ja 6
nM 07
ay
-0
Se 7
p0
Ja 7
nM 08
ay
-0
Se 8
p0
Ja 8
nM 09
ay
Se 0 9
p0
Ja 9
nM 10
ay
-1
Se 0
p1
Ja 0
nM 11
ay
-1
Se 1
p1
Ja 1
n12
50
35
Ja
nM 05
ay
-0
Se 5
p0
Ja 5
nM 06
ay
-0
Se 6
p0
Ja 6
nM 07
ay
-0
Se 7
p0
Ja 7
nM 08
ay
-0
Se 8
p0
Ja 8
nM 09
ay
-0
Se 9
p0
Ja 9
nM 10
ay
-1
Se 0
p1
Ja 0
nM 11
ay
-1
Se 1
p1
Ja 1
n12
40
Foreign Exchange Transactions Weighted Index (FXTWI)
Like the TWI, the FXTWI is nominal and effective, the difference being that while the TWI uses total merchandise
trade (i.e. imports plus exports) as weights, the FXTWI uses the value of total foreign exchange transactions (i.e.
purchases and sales) in the three core currencies as weights.
The FXTWI also shows that over January – March 2012, the cedi depreciated in FX transactions-weighted terms,
by 4.7 percentage points compared with similar depreciation of 0.9 percentage points in the corresponding period
in 2011. The March 2012 value of the index of 41.85 was 0.6 of a percentage point below the quarterly trend
value.
4.5.2
Real exchange rate developments
Over the first two months of 2012, the real exchange rate movements of the cedi showed cumulative depreciation
of 3.3, 6.2 and 5.8 per cent against the euro, the pound and the dollar respectively. Comparatively, for the
corresponding period in 2011, the real exchange rate trends showed cedi depreciation of 2.4 and 0.2 per cent
against the pound and euro respectively and appreciation of 2.1 per cent against the dollar.
Real Bilateral Exchange Rate Developments
RERI (Jan.02=100)
GBP
USD
108.2
130.2
102.2
138.9
104.4
143.1
129.6
134.8
114.0
129.6
120.3
134.4
Month
2005
2006
2007
2008
2009
2010
EUR
98.9
95.3
89.9
90.1
81.5
92.5
Jan-11
Feb-11
91.7
92.4
118.3
117.9
133.4
136.4
Jan-12
Feb-12
91.8
90.2
115.3
113.1
128.5
128.8
Monetary Policy Report No. 4 Vol.2/2012
MONTHLY CHANGE (%)
EUR
GBP
USD
2011
-0.8
0.6
2012
-1.7
-1.6
EUR
20.2
-3.6
-5.4
0.2
-8.5
11.0
CUMULATIVE (%)
GBP
USD
20.3
11.9
-6.0
8.7
2.3
4.2
25.2
-8.4
-15.6
-5.2
6.3
4.8
-2.0
-0.4
-1.0
3.0
-0.2
-2.4
2.1
-4.0
-2.2
-6.1
0.3
-3.3
-6.2
-5.8
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Inward transfers
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Private inward transfers – received by NGOs, embassies, service providers, individuals etc. - through the banks
for January–February 2012 amounted to $2.92 billion, which represents 10.6 per cent growth over the
corresponding period in 2011, which also turned in 66 per cent growth over transfers through banks in JanuaryFebruary 2010.
Of the total transfers in the first two months of 2012, $311.6 million (or 10.7%) accrued to individuals, compared
with $282.91 million (also 10.7%) in 2011.
2008-9
2009-10
2010-11
2011-12
2008-9
2009-10
2010-11
2011-12
Transfers to Individuals
(Jan-Feb: 2005 - 2012)
35
300
30
250
25
200
20
150
15
100
10
50
5
-
2005
2006
2007
2008
2009
2010
2011
2012
Level ($'m)
166.2
247.9
225.3
289.5
223.1
239.7
282.91
311.6
Share (%)
28.0
32.0
23.7
20.1
17.8
15.1
10.73
10.7
Share (%)
350
$'mill.
Year
2008
2009
2010
2011
2012
INWARD TRANSFERS THRO' BANKS
Jan - Feb, 2008 - 2012
($'million)
Jan
Feb
JAN - FEB
654.90
784.71
1,439.61
660.47
589.62
1,250.09
821.61
766.59
1,588.20
1,375.11
1,261.67
2,636.78
1,417.64
1,498.07
2,915.72
Change ($'m)
5.57
-195.09
-189.52
161.14
176.97
338.11
553.50
495.08
1048.58
42.53
236.40
278.93
Change (%)
0.9
-24.9
-13.2
24.4
30.0
27.0
67.4
64.6
66.0
3.1
18.7
10.6
-
4.6 Gross and Net International Reserves
In the last quarter of 2011, the GIR grew by 17.2 per cent to $5.4 billion in December. In 2012:Q1, it declined by
13.8 per cent from the December peak to $4.6 billion in March 2012. The end-March 2012 level of GIR
represented a year-on-year increase of 3 per cent.
Gross & Net International Reserves
(Jan. 2007 - Mar. 2012)
5,400
4,400
similar pattern. It peaked at $4.4 billion in December 2011 and
3,400
declined in the first quarter of 2012 by 28.3 per cent to $3.2 billion
in March.
$'million
Developments in the Net International Reserves (NIR) followed a
GIR
2,400
1,400
NIR
Monetary Policy Report No. 4 Vol.2/2012
Jan-12
Sep-11
Jan-11
May-11
Sep-10
Jan-10
May-10
Sep-09
Jan-09
May-09
Sep-08
Jan-08
May-08
Sep-07
May-07
Jan-07
400
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