Trend analysis by the Ghana International Trade and Finance Conference (GITFiC) has projected Ghana’s economy will not achieve any huge success gap in the first quarter of 2022 despite the hope of appreciable growth.
However, the outlook says the economy has over the last two decades evolved to be one of the most resilient in the world.
“Following the data trend and the analysis in recent years, Ghana’s economy though might not achieve a huge gap success in the short term (first quarter, 2022) yet, will continue with appreciable growth per the subsections aforementioned in the sterilized facts,” part of a report issued by GITFiC stated.
Admitting the country has not been spared in the adverse effect of the coronavirus pandemic just like the rest of the world, it indicated the management of economic affairs was laudable.
“It is worth noting that the recent COVID-19 pandemic has affected Ghana’s economy just like any other economy in the world, yet, the state did not do badly in managing its economic affairs during and after the intense era of the pandemic,” it added.
Read the full report below:
GITFiC’s OUTLOOK ON GHANA’S ECONOMY FOR THE FIRST QUARTER OF THE YEAR 2022
Introduction
CONSIDERING SOME ECONOMIC INDICATORS TO FORECAST GHANA’S ECONOMY, IN EARLY 2022.
Economic growth and development has been an ancient phenomenon even before the great depression from 1929 to 1933 where various challenges befalling one’s economy are looked into for stability.
While economic growth covers the ascendant increase in the size of one’s economy, development encapsulates how the growth impacts the life of the citizens, hence, affecting their standard of living positively.
This demands that various drivers of the economy, preferably the macro-economic indicators such as the gross domestic product (GDP), inflation, debt to GDP, employment be scrutinized and where necessary, strengthened. This is a global phenomenon and Ghana is no exception.
The economy of Ghana, both under the military regime and democratic governance, has its challenges amidst the numerous success stories. Yet, the economy has evolved to be one of the resilient in the last two decades.
Sterilized facts about some economic indicators
The Gross Domestic Product –The gross domestic product captures all economic activities found within the boundaries of one’s economy. This is measured in nominal GDP adjusted for prices. Ghana’s real GDP in the first quarter of 2020 was GH¢43,999.5million. This increased to GH¢45,378.1 million in 2021 representing a 5.19% increment.
In the second quarter of 2021, the real GDP recorded was GH¢39,162.2 million compared to GH¢37,710.3 million in 2020. The real GDP recorded in the third quarter of 2020, GH¢40440.3 million, increased to GH¢43,093.5 million in 2021 representing a 1.3% upward shift. The GDP in 2020 fourth quarter increased by 0.8% in 2021.
Employment/Unemployment – Unemployment establishes the available people within the labour force willing to work at an existing wage rate yet are not finding a job.
Ghana recorded an unemployment rate of 4.53% in 2020 compared to 4.12% in 2019 and 4.16% in 2018 according to the Ghana Statistical Service.
Debt to GDP Ratio – This compares an economy’s total output measured in real GDP to its debt over some time.
Hence, a higher level of an economy’s debt reduces its economic growth and should this be sustained, affects the standard of living of the people since the government will divert huge sums of money that could be used to implement a social intervention or for infrastructural development to service its debt.
This comprises the external debt portfolio and other internal debt accumulated in support of certain internal sector operations.
In 2018, two major occurrences happened that affected the debt to GDP ratio – recalibration of the measurement of debt to GDP and the financial bailout in the financial sector. Amidst the two, Ghana’s debt to GDP stood at 57.9% in 2018. According to the Ministry of finance, Ghana’s Gross Public debt ending December 2020 was GH₵291.63 billion (US$50.83 billion).
This represented about 71.8% of the economy’s GDP showing 33.6% upward movement against the 62.4% recorded in 2019.
Inflation – The persistent increase in the general price level of goods and services in a particular economy over time is a major indicator of the success of one’s economy. Inflation in Ghana stood at 9.4% in December 2018 compared to 7.9% in 2019, 10.4% in 2020, and 10.6% in August 2021. Inflation, also known as consumer price inflation has its source from the consumer price index (CPI) which measures the proportionate changes in the price level of household consumption of various goods and services. The third and fourth quarters of 2020 showed an inflation rate of 10.8% and 10.1% respectively. Likewise, the first and second quarters of 2021 revealed a 10.2% and 7.9% rate of inflation to that effect.
The way forward per 2020-2021 trend
The robustness of an economy is a gradual process given that most of the macroeconomic indicators have to improve to an appreciable state where there is an increase in poverty reduction hence achieving a high-quality standard of living. It is worth noting that the recent COVID-19 pandemic has affected Ghana’s economy just like any other economy in the world, yet, the state did not do badly in managing its economic affairs during and after the intense era of the pandemic. Following the data trend and the analysis in recent years, Ghana’s economy though might not achieve a huge gap success in the short term (first quarter, 2022) yet, will continue with appreciable growth per the subsections aforementioned in the sterilized facts.
Gross Domestic Product – The Ghana International Trade & Finance Conference (GITFiC) expect an evident revival in Ghana’s growth as the economy is gradually improving from the shocks of COVID-19 and its related concomitant effects.
As a well-diversified economy, Ghana’s extractive sub-sector (oil and Gold) and cocoa still remain reliant for revenue generation that anchors growth. The crosscutting production activities also rely heavily on flow of electricity supply.
With favourable expectation in commodity price shocks and improved flow of electricity generation and supply, GITFiC project an upward increase of GDP between 4.9% to 6.3% showing a surge given the previous year’s data and the various measures put in place by the government to raise revenue for productive activities in the economy.
Employment – The 4.53% unemployment rate in 2020 could be partly attributed to the COVID-19 pandemic.
The gradual relief from the effects of the pandemic in Ghana, the employment policies highlighted in the 2021 budget to be implemented in 2022, among other measures to be implemented, should unemployment rate not decrease beyond the hovering figure of 4.1 in 2018 and 2019, GITFiC project maximum 4.4% unemployment rate in 2022.
Debt to GDP Ratio – In fact, the debt to GDP ratio has received a consistent increase for over a decade in Ghana. The implementation of the holistic free senior high school policy in 2017 against the existing “progressive free senior high school” in part added to Ghana’s huge debt to GDP in recent years.
However, we expect that experts in the field are learning from their experiences on how to reduce the cost involved in government financing the policy through internally generated funds alongside other policies to curb the borrowing power.
At least, a 2% to 3% reduction in debt to GDP ratio in 2022 will be a good move to build on by the nation.
Inflation – Per the sterilized facts highlighted above, GITFiC expect a further reduction in inflation given that 2021 saw a reduction showing considerable revival from the pandemic shocks internationally and domestically.
Conclusion
Ghana is still in the right direction with considerable revival from the shocks of the pandemic and other challenges hoping that the increase in taxes in various sectors in Ghana’s economy will reflect in developmental projects.
HIGHLIGHTS:
- GITFiC project an upward increase of GDP between 4.9 to 6.3%
- GITFiC project a maximum 4.4% unemployment rate in 2022.
- GITFiC predicts a 2% to 3% reduction in debt to GDP ratio in 2022
- GITFiC predicts a reduction in inflation in 2022