Ghana’s economy is projected to grow the slowest in more than two decades on the back of mounting fiscal challenges, tight monetary policy and disruptions in oil production, the IMF has said in its latest World Economic Outlook report.
According to the report, the economy will this year expand by 3.3 percent, the lowest since 1994 when the economy grew by a similar margin.
The latest forecast provides a dimmer outlook of the economy after a similar report released in April projected a 4.5 percent growth this year on the assumption that the resolution of the power supply challenges that had crippled many businesses will help to boost economic activities.
However, the IMF, which is helping the government to manage the economy under a three-year US$918 million Extended Credit Facility programme, foresees the economy performing worse than that of last year when the power crisis reached its peak.
According to the IMF domestic revenue has so far underperformed, reflecting lower-than-projected oil prices, weak economic activity with lower business profits and personal incomes, as well as lower-than-expected revenue impact from several measures implemented so far.
“In particular, the ECOWAS Common External Tariff (CET) was expected to deliver about 0.5 percentage point of GDP in additional revenues, but so far the revenue impact has been marginal, while the administrative measures’ impact on direct tax collection has also been negligible,” the Fund said.
The latest prediction is therefore expected to come as a shock to the government, which has expressed continued optimism that the economy will this year rebound and grow by 5.4 percent.
But the forecast of the IMF show that the government perhaps has been overly optimistic following the coming on-stream of new oil production fields- Tweneboa Enyerra Ntomme- as other renowned policy think-tanks and research institutions have joined the Bretton-Woods institution to foresee the economy slipping further.
For instance, the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana at the outdooring of its publication ‘The State of the Ghanaian Economy’ report last week adopted the cautious posture in assessing the outlook of the of the economy and concluded that the debt strategy of government, the high levels of taxes and the energy challenges that the country has faced as well as the curse of election year splurge which often coincides with a reversal of fiscal consolidation efforts will compromise the country’s growth prospects this year.
The IMF in assessing the economic outlook also posited that higher public debt level, a replay of the past spending splurges in election years would greatly heighten the risk of a full-blown economic and financial crisis and undermine Ghana’s development progress. The Fund said even absent such a policy slippage, heightened risk aversion and investor uncertainty as the December 2016 election approaches could yet pose a challenge.
Nonetheless, critics have downplayed the IMF’s predictions and argued that the Fund has always held a pessimistic view of growth prospects for Africa, as historically, the performance of African countries has always been better than the forecasters predictions partly because they continue to be bulked with the concept and ideas that countries in Africa growth is mostly dependent on commodities.
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