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Economic light at the end of tunnel if…

BY: Charles Benoni Okine
Ken Ofori-Atta, Minister of Finance — Doing something right to revive the economy from global shocks
Ken Ofori-Atta, Minister of Finance — Doing something right to revive the economy from global shocks

The World Bank Africa Region, through its Africa Pulse report, is projecting growth in Sub-Saharan Africa to decelerate from four per cent to 3.6 per cent in 2022, and estimated at 3.9 per cent or 4.2 per cent in 2023 and 2024 respectively.

It attributed the growth deceleration in the year under review to reflect what it described as several short-term headwinds, the slowdown in the global economy, lingering effects of the coronavirus pandemic, elevated inflation, rising financial risks owing to high public debts reaching unsustainable levels, continued supply disruptions and the war in Ukraine.

Of the region’s three largest economies, South Africa’s growth is expected to decline by 2.8 percentage points in 2022, dragged by persistent structural constraints, while Angola and Nigeria are projected to continue with the momentum of 2021, up by 2.7 and 0.2 percentage points, respectively, thanks partly to elevated oil prices and good performance of the non-oil sector.

Ghana resilient

Although the report failed to mention Ghana, one of largest economies in West Africa after Nigeria, the latest report from the Ghana Statistical Service (GSS) has pointed to strong resilience, an indication that measures put in place by the government to quickly move out of the scares of the COVID-19 pandemic are showing positive results.

For instance, the economy was reported to have expanded at a faster rate last year than the government and international bodies had projected. It grew by 5.4 per cent in 2021, 0.4 per cent above the government’s growth target of five per cent for last year.

The 2021 growth rate is also healthier than the revised growth rate of 0.5 per cent for 2020, according to the provisional data from the GSS.

The data further indicated that the economy was now worth more than GH¢459.13 billion in 2021 compared to 2020 when it was valued at more than GH¢391.94 billion.

The Bretton Wood institutions for the period had projected that the economy would expand by 4.7 per cent and 4.1 per cent respectively, compared to 5.4 per cent growth rate then anticipated.

The higher-than-projected growth rate for last year strengthens hopes that the country is on its way to full recovery from the effects of the COVID-19 pandemic.

Economic watchers

Economic watchers have described the country’s performance as positive in view of the fact that it has been able to outperform the downward reviewed targets.

A Fellow of the Chartered Institute of Economists, Ghana, Dr Sam Ankrah, said the growth rate, although positive and one in the right direction, should not make the government complacent.

According to him, should the government focus more on the productive sectors of the economy by using funds borrowed from the international commercial markets more positively, the growth rate will be way higher than anticipated.

“We need to expand the agricultural sector in a far better way than it is now. We need to translate the macro into micro and by this, I mean, we should use the real sectors to create more jobs for the people,” Dr Ankrah who is also the President of the Africa Investment Group said.

Review

Against this background, he called for immediate review of all the government’s flagships programmes such as the ‘Planting for Food and Jobs’ and the ‘One District, One Factory’ initiatives to make them more responsive to the needs of the people.

He argued that considering the billions of cedis that have been sunk into the programmes, the returns do not match the investments, hence the need for a review, not cancellation, “because every new programme will face challenges. All we need to do is to sit back and review and address the challenges to make them work to achieve their purpose”.

Others have made similar calls, demanding accountability because of their fervent view that the economy can expand better than it is now.

They are also of the view that with commodity prices shooting up on the international market, it can have an impact on the country’s growth. However, the real sectors are not performing and, therefore, lack of employment opportunities is a problem.

To them, the trajectory points to something positive at the end of the year as indicated in the Bank of Ghana report for the first two months of the year with manufacturing leading the pack.

Conclusion

According to the GSS report, overall GDP growth was driven among other things by large expansions in the services and agricultural sectors, as the industry sector suffered a contraction in growth.

While the services sector expanded by 9.4 per cent, the agricultural sector grew by 8.4 per cent. Growth in the services sector was led by 33.1 per cent growth in the information & communication sub-sector, which recorded the highest year-on-year GDP growth rate.

With these, it is clear that the prospects are there for expansion and the government must fully leverage that opportunity.

The pandemic and the global supply disruptions caused by the Russian invasion of Ukraine have been challenging but also present a great opportunity for the country to accelerate its industrialisation agenda by massively supporting local industries to produce for local consumption.

The agricultural sector must also be given all the necessary attention by ensuring that the ministry in charge strictly plays by the government’s mandate to support the sector as expected.

There are too many unconfirmed reports of mismanagement of funds meant to transform the sector, but the country’s future is hinged on the agricultural and industrial sectors, so the call by Dr Ankrah for a review of the flagship programmes is not only apt but timeous.

The several short-term headwinds, including the slowdown in the global economy, lingering effects of the coronavirus pandemic, elevated inflation, rising financial risks owing to high public debts reaching unsustainable levels, continued supply disruptions, and the war in Ukraine as indicated by the Pulse report, had existed but Ghana sailed through.

That clearly points to something being done positively and, therefore, the government must not lose sight of the advice from the economic watchers if it is to see some brighter economic light at the end of the tunnel.