The continuous improvement in the country’s economic activities raises much optimism for a strong rebound of the Ghanaian economy this year. This has made the government to revise its growth forecasts for 2021. The West African second largest economy is now expected to expand by 5.1 percent instead of the 5.0 percent forecasted at the beginning of the year.
According to Finance Minister, Ken Ofori-Atta, the revision of the 2021 macroeconomic framework is necessitated by developments in the real, fiscal, monetary, and external sectors of the economy for the first six months of the year, as well as other domestic and global developments.
“…a recalibration of the macroeconomic framework to reflect the above developments has led to a revision in the overall real GDP growth rate to 5.1 percent in 2021 compared to the 5.0 percent originally projected in the 2021 Budget. Similarly, non-oil GDP for 2021 growth has been revised to 7.0 percent, up from the 6.7 percent in the 2021 Budget.
“…this revision, therefore, is informed by performance of the economy for the first half-year of 2021”.Ken Ofori-Atta
Meanwhile, the strong growth forecast this year is expected to continue over the medium-term (2022-2025), with real GDP growth now expected to average 5.4 percent instead of the earlier average of 5.0 percent.
Mr. Ofori-Atta, communicating the revision in the country’s growth forecast in the Mid-Year Budget Review, highlighted that the country’s strong growth will be supported by a ramp up in Government’s flagship programs, the implementation of the Ghana CARES (Obaatan Pa) Program, benefits from the AfCFTA Program, an enhanced digitalization drive, an aggressive FDI push, and the pursuance of the Ghana as a Regional Hub agenda.
Despite the revisions in some key macroeconomic indicators, the Minister indicated that, the originally projected Gross International Reserves cover of 4.0 months of import of Goods and Services and the end-period inflation projection of 8.0 percent, however, remain unchanged.
Growth Performance in 2021 Q1
After growing at 0.4 percent in 2020, reflecting the impact of the COVID-19 pandemic, the economy picked up strongly in Q1 2021. Mr. Ofori-Atta noted that the up-tick in economic activity in Q1 2021 reflects the impact of the COVID-19 containment measures and recovery interventions Government has been implementing since COVID-19 broke out in March 2020.
Provisional National Accounts Statistics published by the Ghana Statistical Service (GSS) in June 2021 show that the overall real GDP growth for Q1 2021 was 3.1 percent. This shows a continuous recovery momentum from the pandemic from the last quarter of 2020 when the economy grew by 3.3 percent.
Also, Non-oil GDP equally picked up strongly in the first quarter of 2021 growing at 4.6 percent up from the 4.0 percent growth recorded in Q4 2020.
Nevertheless, final statistics provided by the GSS show that the economy contracted much more than the provisional data reported for Q2 and Q3 last year. The Finance Minister indicated that the economy contracted by 5.7 percent in Q2 2020 and 3.2 percent in Q3 2020, higher than the contraction of 3.2 percent and 1.1 percent earlier reported. All these show that the COVID-19 might have had a much higher impact on the Ghanaian economy than government’s official estimates show.