Are we seeing early signs of Dutch disease?
Latest GDP figures released by the Ghana Statistical Service indicate that the country’s economy grew by 8.5 per cent in 2017 against a target of 6.3 per cent, making it the highest to be recorded in the last five years.
This growth was largely driven by increased production in the upstream oil sector, which grew by 80.4 per cent; contributing to an increase in the industrial sector, which accounts for almost a quarter of the economy.
Although the industrial sector recorded the highest growth rate of 16.7 per cent, it was largely influenced by the mining and quarrying sub-sector which recorded a growth of 46.7 per cent, as the 2017 Non-oil GDP for Industry recorded a sharp decrease from 4.9 per cent in 2016 to 0.4 per cent.
While the GRAPHIC BUSINESS commends the government for the growth of the oil and gas industry, we are concerned at the rate at which the non-oil industry sector is declining.
Since 2010, when commercial production of oil began, the annual growth in the manufacturing sub-sector (which encompasses all businesses turning raw materials into finished or semi-finished goods) has been on the decline.
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From a growth rate of 6.9 percent in 2011, it has consistently weakened to 4.5 per cent in 2017, the lowest in more than a decade. In 2006, the manufacturing sub-sector grew by 10.2 per cent.
Ironically, while the growth of the manufacturing sector has taken a nose-dive for a decade, that of oil and mining, which are the growth drivers in the industry sector, have been robust. Why is a deceptive picture being painted to everybody?
Despite the fact that the decline in growth of the manufacturing sub-sector is alarming, it has gone without mention.
This is not good for national development, given that it could signal an emergence of the dreaded Dutch Disease – an economic ailment associated with naturally resource-rich countries, where non-oil sectors suffer from weak growth while oil sectors continue to post strong growth.
We believe the discovery of oil and gas is gradually leading to a situation where total focus is on the oil and gas sector, while the other sectors of the economy are neglected.
We, therefore, urge the government to as a matter of urgency to pay serious attention to the country’s manufacturing sector.
Though the discovery of oil and gas is good for any economy, it has its negative impact in terms of suppression of other sectors; which is beginning to have its impact on the Ghanaian economy.
While at it, we are also urging the government to take a critical look at the country’s agriculture sector whose contribution to the GDP of the country is also on a decline.
Although the sector increased from a growth rate of three per cent in 2016 to 8.4 per cent in 2017, its contribution to the country’s GDP has declined from 18.7 per cent to 18.3 per cent.
The sector has been experiencing a steady decline for nine years from 31.8 per cent in 2009 to 29.8 per cent in 2010, 25.3 per cent in 2011, 22.9 per cent in 2012, 22.4 per cent in 2013, 21.5 per cent in 2014, and 20.3 per cent in 2015.
It further reduced to 18.9 per cent in 2016 and 18.3 per cent in 2017, respectively.
These are early symptoms of the Dutch disease, and it needs immediate attention.