Economy set for 2nd slowdown: Revenues, jobs at stake, Economist calls for review of targets

The economy is set for a slowdown again this year after failing to grow as expected in 2022.

Growth slowed down to 3.1 per cent last year, below the target of 3.7 per cent, and is now set to dip further to below two per cent this year.

Experts have agreed that the government’s target of 2.8 per cent growth is now elusive as debt pressures and funding constraints threaten the rate at which the economy can expand.

Indeed, the International Monetary Fund (IMF) has said that it expects the economy to grow at 1.6 per cent this year with dire implications on jobs and revenues to the public purse.

Revision

Economist and Lecturer at the Academic City University, Eugene Bawelle, said government would have to lower its 2023 gross domestic product (GDP) target of 2.8 per cent in the mid-year budget review after missing out on the 2022 target.

Mr Bawelle said the 2023 budget was also out of gear as most of the revenue measures and external funding sources had not yet materialised due to the delayed negotiations of the IMF.

As a result, the economist said the government would likely miss its 2023 growth target of 2.8 per cent, a development which would call for a review of the revenue and expenditure projections to reflect the reality.

GDP figures

Mr Bawelle’s advice is coming on the back of the latest figures released by the Ghana Statistical Service (GSS) which indicated that the country’s economy grew by 3.1 per cent in 2022, slightly below the government’s target of 3.7 per cent.

It is also lower than forecasts from the International Monetary Fund, World Bank and the African Development Bank all of which projected a GDP growth of 3.6 per cent, 3.5 per cent and 3.6 per cent respectively in the period under review.

Non-oil GDP grew by 3.8 per cent in 2022, compared to 6.6 per cent in 2021, while non-gold GDP also grew by 2.1 per cent in 2022, compared to 7.1 per cent in 2021.

Bawelle in an interview with the paper said it was not surprising that Ghana’s GDP growth recorded figures lower than government’s projection for the year.

He said that was because since June 2022 when the government announced its decision to seek a bailout support from the IMF, many business activities which relied on either multilateral or bilateral financing or some arrangements outside government’s financing had abruptly halted, heightening uncertainties in the economy.

You can talk about the Kumasi inner city roads, Eastern corridor, the Kejetia market phase 2, the construction of some interchanges across the country and many similar activities in other sectors of the economy,” he stated.

Services sector dominate

The figures from the GSS also indicated that the services sector continued to dominate GDP growth, contributing 44.9 per cent of the value of the economy in 2022.

This was followed by the industry sector with 34.2 per cent and the agriculture sector with 20.9 per cent.

General Secretary of the Ghana Agriculture Workers Union (GAWU), Edward Kareweh, described as sad, why a sector that used to be the major driver of economic growth, emerged as the lowest contributor in the last decades.

He, therefore, called for a total overhaul of the sector in a bid to increase its contribution to economic growth.

He said while it was not unusual for the sector to play second fiddle to other sectors, Ghana’s case needed attention because the growth in the other sectors were not being driven by production.

He noted that while the agricultural sector’s contribution had been dwindling over the years, one would have expected the growth in the industry sector to be driven by the manufacturing sub sector because it was production based.

Unfortunately, the manufacturing sub sector has not seen much growth in the last few years, with the 2022 GDP figures indicating that the sector contracted by 2.5 per cent.

In times past, agriculture was driving the GDP of the country but now, it is the lowest. While it is not unusual to have the agriculture sector play second fiddle to other sectors, it must be looked at in context.

“In our situation, the manufacturing sector is not growing as it should be. The services sector is growing based on importation and not production. We are not paying particular attention to production,” he stated.

Kareweh said the two major global events which was the COVID-19 pandemic and the Russia/Ukraine crisis all pointed to the fact that the agriculture sector needed an overhaul for it to play a dominant role in the economy.

We need to reform agriculture production in a way that will allow us to be more resilient. If we still believe the sector is the backbone of the economy, then we need to re-engineer it for it to be more impactful.

“The sector has the potential to create more decent jobs and solve the country’s unemployment situation,” he stated.

Sectorial growths

The services sector grew by 5.5 per cent in the year under review, with the information and communication sub sector recording the highest year-on-year GDP growth rate of 19.7 per cent.

This was followed by education (10.2%); health and social work (9.2%); public administration, defence and social security (6.1%); financial and insurance activities (5.7%); transport and storage (4.7%); and trade, repair of vehicles, household goods (1.3%).

Some of the sub sectors which contracted include hotels and restaurants (-1%); other personal service activities (-1.3%); real estate (-7.6%); and professional, admin and support services (-10.9%).

The industry sector also grew by 0.9 per cent in the year under review, with the mining and quarrying sub sector recording the highest year-on-year annual GDP growth rate of 8.1 per cent.

All the other sub sectors contracted in 2022. The manufacturing sub sector contracted by 2.5 per cent; electricity sub sector contracted by 3.3 per cent; construction sector contracted by four per cent; while the water and sewerage sub sector also contracted by 4.9 per cent.

The agriculture sector, on the other hand, also grew by 4.2 per cent in 2022, with the fishing sub sector recording the highest year-on-year growth rate of 8.8 per cent.

This was followed by the livestock sub sector (5.5%); crops (3.8%); and forestry and logging (1.7%).