Ghana is expected to end 2021 and 2022 with economic growth rates of 4.9 percent and 5.5 percent, respectively, according to the World Bank's latest report. The country is among West African countries projected to grow at a 3.2 percent rate in 2021, up from-0.8 percent in 2020, and further grow by 3.6 percent in 2022, according to the Bretton Wood Institution.
"Ghana is projected to exhibit growth of, respectively, 4.9 and 5.5 percent in 2021 and 2022, reflecting strong growth in exports. The economy performed relatively well despite the outbreak of the Delta variant thanks to the fiscal support by the government.
Ghana received the equivalent of US$1 billion in the recent IMF SDR allocation, part of which will go to support economic recovery under the COVID-19 Action Recovery and Economic Stimulus (CARES) program. In an effort to meet its ambitious domestic revenue mobilization targets (starting in 2021), the government is implementing planned spending cuts (starting in 2022) and the Energy Sector Recovery Program," the report said.
The government’s 2021 Budget Statement targeted overall real GDP growth of 5.0 percent, implying the economic growth would be 0.1 percent less than the government's target going by the World Bank projection.
The report said that African countries have been relatively disciplined in their monetary and fiscal policies, adding that inflation rates have remained relatively under control across countries in the region. At the same time, the expectation of low interest rates for a longer period in advanced economies is enabling African central banks to maintain an accommodative monetary policy.
On the fiscal front, public sector deficits have not expanded at a faster pace than in advanced economies. Amid the pandemic, the median fiscal deficit in the region expanded by 2.9 percentage points of GDP in 2020 as opposed to an expansion of 7.6 percentage points of GDP in advanced countries. The tighter fiscal space has prevented countries from injecting the level of resources required to launch solid reforms.
"With this insufficient fiscal support, countries in the Sub-Saharan Africa region have been growing below trend. In this context, countries in the region cannot implement procyclical fiscal policies when the exogenous health shock is still disrupting economic activity and affecting long-term growth prospects—in particular, the likely long-term effects on health and education. An aggressive fiscal consolidation at this juncture might prove detrimental in the long run."
According to the World Bank, the sub-Saharan African countries' fiscal deficit in the first half of 2021 widened at 4 percent of GDP, driven by an increase in debt servicing costs and capital expenditure. These rising fiscal burdens are expected to cause significant debt sustainability concerns after reaching record levels, particularly in countries with high debt-to-GDP ratios.
"Improving debt transparency remains critical. In particular, African countries need to collect and publish more and better debt data and improve contingent liability reporting. And it is imperative to continue building government staff capacity for improved debt management, including for audits and internal controls," it concluded.
Source: Mohammed Bomanso Issah(Real Estate Times Africa)