Some economists are warning that Ghana’s economic outlook, following revisions to fiscal targets for 2022, will make things difficult for the business community.
The government, in the 2022 mid-year budget review, cut the country’s gross domestic product (GDP) – production revenue growth for the year from 5.8% to 3.7%.
He also announced that there would be a shortfall as spending increased.
The government aims to mobilize GH¢100.5 billion in revenue and subsidies, with total expenditure of GH¢137.5 billion.
Meanwhile, inflation (the rate of increase in the prices of goods and services), which was expected to end the year at 8%, is now expected to rise to 28.5%.
Speaking to the Ghana News Agency, the economists explained that the implication of the revised fiscal targets was that there would be slow growth in the economy.
They noted that with the government’s flagship economic programs – Planting for Food and Jobs (PFJ) and One District-One Factory – not delivering the expected gains amid uncertainty about microeconomic stability and high cost of capital, companies would continue to face difficulties. .
Dr. Patrick Asuming, Development Economist at the University of Ghana Business School (UGBS), said: “Things are going to be much worse than expected when the initial budget is read in November 2021.”
“The economy should no longer grow rapidly. The growth rate will be lower and inflation will be more than three times higher than we had originally expected. The depreciation of the exchange rate will also be higher. So overall, companies are looking at a less prosperous economy and a more unstable economy,” he said.
Dr. Asuming called on the government to prioritize the country’s productive sectors, especially agriculture, and streamline its flagship programs by ensuring sustainable financing mechanisms for these projects.
Programs should also be integrated with other sectors of the economy, such as manufacturing, and products should be upgraded and made export-ready to provide some respite for businesses.
Mr. Courage Boti, an economist and financial analyst at GCB Capital, noted that inflationary pressures were likely to ease by the end of the year, but businesses would suffer.
He said: “Inflationary pressures are expected to ease by the end of the year, but fiscal prudence is more critical, so the government should be cautious in cutting spending further to help the country meet its fiscal targets and deliver business respite.”
Figures provided in the 2022 budget revision showed growth was 3.3% for the first quarter of 2022, compared to 3.6% recorded during the same period in 2021.
The moderation in growth in the first quarter of 2022, as shown by the Bank of Ghana’s updated Composite Index of Economic Activity (CIEA), was 15.8% in March 2022, compared to 26.3% in during the corresponding periods of 2021.
Meanwhile, the average cost of inputs received by domestic producers for the production of their goods and services (Producer Price Inflation) for the month of June increased to 38% from 33.3% in May.
Mr. Ken Ofori-Atta, the Minister of Finance, admitted that the Ghanaian economy was going through a difficult period, which affected both businesses and individuals.
He said: “We know things are tough now. But we have a plan and the will to drive it,” and called on citizens to avoid pessimism, which has robbed invaluable energy from the march forward towards transformation.
He was convinced that the strengthened national program with the International Monetary Fund (IMF), which should come into effect next year, would provide the stability the economy needed and the confidence to turn to the international capital market.