According to Databank Research latest analysis of the economy, it has maintained its end-year 2021 growth forecast of overall real Gross Domestic Product (GDP) growth rate within 3.9% and 4.9%.
The research further pointed out that the economy expanded by 3.1% in the first quarter of this year. The growth was spurred by Construction (14.2%), Manufacturing (6.1%), ICT (22.1%), Livestock (5.5%), Crops and Cocoa (4.9%), Financial and Insurance Services (4.8%) and Transport (3.0%).
Meanwhile, Databank Research noted that there is economic recovery activity ongoing, albeit, on a slower pace as the post-lockdown growth remains restrained. It also take into cognizant rising cost of production as witnessed by hikes in taxes, fuel and transport fares.
“We expect the increased utilisation of spare production capacity to sustain the recovery in the manufacturing and trade sub-sectors. We, however, view the rising cost of production occasioned by the tax hikes, transport fare hikes, and higher fuel cost as a downside risk to the expansion in manufacturing and trade.”
However, the research suggested that they expected a boost in the agriculture sector in the second half of the year mainly because we are entering into the cocoa season and since cocoa is the main driver of the agriculture sector, it will boost growth.
“But the food harvest season in the third quarter 2021 and the main cocoa season in the fourth quarter 2021 should propel agriculture growth in the second half of the year, albeit with some risk from the unfavourable rainfall pattern across the southern sector”.
Moreover, the research noted that the trade sub-sector has provided a stronger foundation for a positive second half of the year.
“With the trade sub-sector also posting a modest growth of 2.7%, we believe Ghana’s growth pulse is gradually strengthening, albeit with downside risks. The sharp contraction recorded in second quarter 2020 provides a favourable base effect for a stronger growth print for second half of 2021”.
On the downside, the report further asserted that there is contractions in the extractive and hospitality sectors for the period, adding, “within the extractive sector, mining & quarry (excl. oil & gas) contracted by 5.3% while the oil & gas sector shrunk by 16.2% in first quarter 2021 (vs. -3.6% in first quarter 2020).”
This contraction is the 5th consecutive quarter of negative growth within the extractive sector, reflecting the lingering impact of Covid-19 on physical demand and the supply of fuel and metals. The hospitality industry showed signs of recovery as the rate of contraction moderated from -73.0% in second quarter 2020 to -10.7% in first quarter 2021.
Meanwhile, government will begin a gradual rollout of the GH¢100 billion Ghana CARES programme from today over the medium term.
“We view the CARES programme as a catalyst for growth in the short to medium term. However, potential challenges with financing the programme amidst bottlenecks in the vaccination rollout are headwinds to the effectiveness of the interventions”, the report said.
Additionally, “aggregate wage growth remains muted so far in 2021, and the tax hikes could exert further downward pressure on demand and general economic activity.”
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