Opinions differ on 2015 Budget
Economists are divided over whether the real objective of government’s 2015 Budget and Eonomic Policy is to transform the economy or stabilise it.
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This is because although the budget carried some bold initiatives, the Minister of Finance, Mr Seth Terpker, paradoxically chose to project lower economic growth rates for 2015.
While the total value of goods and services produced within the economy, also known of Gross Domestic Product (GDP), is projected to record a lower real growth rate of 6.9 per cent at the end of this year, the target for 2015 is a modest 3.9 per cent (including oil).
Previously, the economy had expanded by 7.6 per cent of GDP in 2013, 8.8 per cent in 2012 and 15 per cent in 2011.
On the flip side, the government is targeting to reduce its overall expenditure from an expected GH¢10.9 billion, equivalent to 9.5 per cent of GDP at the end of 2014 to 6.5 per cent of GDP (about GH¢8.82 billion) at the end of 2015 and gradually reduce it to 3.5 per cent of GDP in 2017. Some economists have described the deficit target of 6.5 percent by the end of 2015 as quite ambitious.
The budget which has the theme, “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”, among other things, spelt out major developments to happen on the oil and gas/energy front, as well as initiatives to ensure that the structures of the economy are transformed.
The transformation would be spurred by support to local industries, specifically the removal of Value Added Tax (VAT) on locally produced pharmaceuticals and their raw materials as well as on the production of machetes and exercise/text books.
Analysts’ perspectives
Two economists, Professor Peter Quartey and Dr John Gatsi, agree that the country economy was enlarging for which a lower growth rate still made a difference. But they differ on whether the targets are ambitious enough. Another economist, Dr.Abednego F. Okoe Amartey said the growth target is not ambitious.
“My reservation is the GDP growth projection of 3.9 per cent. This will be below the African average. So if the budget is meant to bring transformation, why project to grow below the African average and how you have been growing in recent times,” Professor Quartey, who is the Head of the Economics Department of the University of Ghana, asked in an interview with the GRAPHIC BUSINESS on November 21 in a quick reaction to the 2015 Budget Statement and Economic Policy of the government.
Prof Quartey said the growth projection did not also support analysis that the country should be growing at between eight and 10 per cent or more to move people out of poverty.
The Dean, Management Faculty, University of Professional Studies, Accra. Dr. Abednego F. Okoe Amartey said: “The Budget aims to achieve an overall growth rate of 3.9 percent. Certainly, this is not audacious enough especially for an oil- and gas-producing economy like ours.”
“For the budget to have a transformational agenda, bold decisions would have to be taken regarding industrialization, mechanization of agriculture, infrastructural and human resource developments. Perhaps, looking at the myriad of challenges confronting government, a cautious approach is expected. In my view therefore, it is fair to describe the budget as a stabilization tool.”