Maintaining growth momentum: Two analysts urge govt to be prudent, disciplined
Given the positive growth trajectory being witnessed in the first two quarters of the year, economists are calling on the government to stay prudent and more disciplined with expenditure as part of pragmatic measures to sustain the momentum.
They also expect a better enabling environment for the private sector, particularly for the manufacturing and construction sectors to rebound to impact the micro economy which will lead to job creation to solve the huge unemployment challenges in the country.
The Director of the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, and the Dean of the University of Cape Coast School of Business, Professor John Gatsi, made the call in separate interviews with the Daily Graphic in reaction to comments from the joint news briefing by the Ministry of Finance and the International Monetary Fund (IMF) team, which assessed the country’s first half performance under the bailout programme.
They both agreed to the fact that the government’s performance as per the targets set under the IMF programme had been satisfactory; hence, the possibility of the government annexing the next tranche of $600 million by the end of November to bring the total amount to be received for this year alone to $1.2 billion.
Gross Domestic Product (GDP) growth has rebounded strongly, averaging 3.2 per cent in the first two quarters compared to three per cent in the same period in 2022.
This was mainly on the back of growth in services, which recorded a growth of 6.3 per cent, and in agriculture at 6.2 per cent.
The average growth of 3.2 per cent for 2023 quarter one and quarter two is higher than the 2023 revised growth target of 1.5 per cent as earlier projected by the IMF.
The question, however, lingers as to how the growth trajectory is impacting job creation with industry, particularly manufacturing and construction, which seem not to be booming because of a myriad of reasons, including high utility costs, increased taxes and unstable local currency, stagnated payment to contractors on government projects, and a highly unpredictable general economic environment, in spite of the implementation of the IMF programme.
Already, the Bank of Ghana said it had observed improving macroeconomic conditions with relatively strong economic growth overall, and a drop in inflation in August.
Those developments, it said, provided evidence that the policy mix under the three-year IMF Extended Credit Facility was beginning to yield results.
Economic activity is rebounding strongly, the exchange rate is stabilising, inflation is declining and the level of foreign exchange reserves has improved.
Sustained improvement in these indicators should result in the restoration of real incomes and purchasing power.
Funding productive sectors
Prof. Gatsi said considering the areas where the growth was recorded, it was clear that more work needed to be done to ensure that the sectors that would bring relief through job creation — manufacturing and construction, were properly funded for the real impact of growth to be felt.
“Economic management is about creating an enabling environment for the private sector to thrive, creating conditions for jobs to be created and ensuring that public and civil servants are paid to offer the needed services to the private sector,” he said.
The professor of economics also bemoaned the high inflation and the equally high interest rate regime in the country and noted that extra effort must be put in place to reverse the trend if the growth being recorded was to be sustained.
Prof. Quartey said the targets, which had seen more revenue measures introduced to rake in more funds, reduction in the accumulation of debt, gradual reduction in the size of debt and exchange rate stability, among others, were positive signs for the government.
He said the momentum was likely to be sustained because of the conditionalities under the programme and urged the government to ensure that the productive sectors of the economy were not neglected in the revival process.
Prof. Quartey admitted to the challenges of the private sector, particularly those in manufacturing and construction, because of the increased cost of doing business.
He mentioned new tax handles and the quarterly review of utility tariffs, among other things, and noted that these developments had become a hindrance to growth.
However, he was optimistic that should there be no further increase in taxes in the 2024 budget, and the government make frantic efforts to settle all arrears owed players in the construction industry, those sectors would rebound and the growth recorded would be more meaningful.
Prof. Quartey said with banks shying away from granting loans to contractors, the best way to help the construction sector was for the government to play its role.