Even though government has revised its growth target for the year upwards, Professor of economics at the University of Ghana, Peter Quartey, has projected the economy to exceed that target given the rebound of economic activity in various sectors.
Finance Minister Ken Ofori-Atta in his 2021 first quarter budget presentation revised the growth target for 2020 to 1.9 percent from the initial 0.9 percent projected in the mid-year budget, with the latter figure corresponding with the International Monetary Fund’s (IMF) growth expectation.
However, Prof. Quartey, who is the Director of the Institute of Statistics, Social and Economic Research at the University of Ghana, says the target by government is too modest as he expects growth to be around 2.5 percent considering many productive sectors are responding well after the restrictions on movement were lifted, coupled with the upcoming elections.
“I think the revised GDP is even modest. I am expecting growth to be around 2.5 percent but on the condition that we manage the pandemic well and do not record a second wave. Gradually, the economy is opening up; business is picking up and I expect it will translate into higher output.
The ports are open and goods are coming in and out; airport is also open and tourist numbers are increasing; the hospitality industry as a whole is picking up. If schools had also open, considering how education is also big in this country, we would have even seen a higher GDP than we are anticipating. Nevertheless, a GDP growth of 2.5 percent is likely to be achieved.
Also, we are in an election year and during this period there is a lot of economic activity so certainly I expect economic activities to pick up and exceed government’s target,” he said in an interview with the B&FT.
The finance minister himself cited similar reasons for his revision of the growth target to 1.9 percent at the end of the year, saying, current data points to increased economic activity.
“The robustness of our macro-economic fundamentals and the efficacy of Government’s COVID-19 mitigation measures have been borne-out by recent indicators. According to the Bank of Ghana’s surveys in August 2020, consumer confidence is bouncing back strongly and is currently above pre-COVID-19 lockdown levels.
Business confidence has also increased, although below pre-lockdown levels. About 95 percent of businesses surveyed showed strong optimism, reflecting the improving macroeconomic conditions, stability in the exchange rate, lower input prices, moderation in lending rates, and positive industry prospects,” he said.
The Bank of Ghana’s Composite Index of Economic Activity (CIEA) has also tipped GDP to grow between 2 to 2.5 percent at the end of the year, given the rebound of activities in many sectors of the economy, including the hospitality sector which saw a contraction of 79.4 percent in the second quarter.
Target for 2021
The economy is tipped to come back on a resilient path in 2021 and beyond to near pre-pandemic levels when growth has averaged 7 percent since 2017. Mr. Ofori-Atta says he projects the economy to grow at 5.7 percent as a result of the implementation of transformation and revitalization phase of the Ghana Cares programme which is to invest GH¢100 billion in the economy by supporting both small and large companies in some critical sectors.
Besides the Ghana Cares programme, the finance minister also stated that the country will leverage opportunities that will come from the Africa Continental Free Trade Area (AfCFTA) agreement to grow the economy.
“I want to assure this House that we will recover, we will revitalize, and we will transform the economy. We shall pivot off the AFCFTA headquarters in Accra for Ghana to become a dynamic regional hub. We have planted the seeds for a fast-paced and more inclusive recovery. Recognising the role of capital and credit, we are certain that the cleaned-up and revitalised financial sector will support our recovery efforts and sustain growth,” he said.
