2022 GDP projections to be revised - Ministry of Finance hints

BY: Charles Benoni Okine
Ken Ofori Atta- Finance Minister

The Ministry of Finance has hinted of plans to revise its Gross Domestic Product (GDP) projections for this year and the medium-term.

It will also update its debt sustainability analysis (DSA).

This is critical because the DSA assesses how a country's current level of debt and prospective borrowing affect its present and future ability to meet debt service obligations.

The ministry explained that its intention was to reflect what it described as the positive developments in 2021, as well as recent policy decisions which had a bearing on sustaining the momentum towards robust economic growth.

This is on the back of the latest official GDP data released by the Ghana Statistical Service (GSS) for 2020 and 2021 which showed that the economy had expanded more than was anticipated and exceeded the Sub-Saharan Africa (SSA) average growth of 4.5 per cent for 2021.

It is also at a time when the rate of debt accumulation has slowed to pre-pandemic levels while fiscal expansion has also slowed.

For instance, the country’s public debt stock expressed as percentage of GDP now stands at 76.6 per cent of GDP at the end of 2021 compared to the earlier reported 80.1 per cent. Similarly, the 2020 debt stock has also reduced from 76.1 per cent to 74.4 per cent, a further confirmation that the rate of debt accumulation has slowed to pre-pandemic levels.

A release issued by the ministry said: “On April 20, 2022, the official provisional 2021 fourth quarter and overall 2021 annual GDP data were released by the Ghana Statistical Service (GSS).

According to the GSS, real GDP expanded by 7.0 per cent in the fourth quarter of 2021 compared to the 4.3 per cent growth recorded in the corresponding period of 2020. Similarly, non-oil real GDP in the fourth quarter of 2021 expanded by 7.6 per cent compared to 5.7 per cent for the same period in 2020,” the release said.

Provisional real GDP

Explaining further, the ministry said: “On an annual basis, the provisional real GDP growth for 2021 showed a positive outturn of 5.4 per cent, exceeding the 4.4 per cent 2021 projected outturn by one percentage point and the SSA average growth by 0.9 percentage point.

This is a clear confirmation that the economy is on the rebound post the COVID-19 pandemic that saw a revised growth rate of only 0.5 per cent in 2020.

Similarly, the release noted that non-oil real GDP expanded from 1.0 per cent in 2020 to 6.9 per cent in 2021, the highest non-oil real GDP growth rate since the rebasing was done in 2013 exceeding the target of 5.9 per cent for the period.

Nominal GDP

The release said the “nominal GDP for 2021 is estimated at GH¢459,130.9 million, over GH¢18 billion more than the projected outturn of GH¢440,869.4 million for the period, up from GH¢391,940.7 million recorded in 2020. The Non-oil nominal GDP for 2021 is GH¢437,975.2, up from GH¢378,147.9 million in 2020.”

It added that the major implication of the higher-than-projected GDP outturn for 2021 is that all economic indicators expressed as a ratio of GDP will change to reflect the updated GDP data. “These ratios include the debt to GDP ratio, a key factor in determining debt sustainability, the fiscal deficit to GDP ratio, and revenue to GDP ratio.

The new GDP data also has implications for the nominal 2022 GDP target and the growth rate as it is based on the 2021 GDP data which have now been updated,” the release added.

It pointed out that the fiscal deficit (including energy and Finsec payments) is now showing a decline (as a per cent of GDP) from 15.0 per cent to 14.7 per cent of GDP for 2020. Similarly, the fiscal deficit of 2021 has reduced from 11.7 per cent to 11.4 per cent.

These developments are positive and confirm the fact that, the economy is rebounding post-COVID-19, the rate of debt accumulation is tapering off, and there is a slowdown in fiscal expansion with Ghana on track to return to the Fiscal Responsibility Act deficit threshold of five per cent of GDP by 2024.