The Director of Research at the institute of Economic Affairs (IEA) has stated that per Ghana’s current growth trajectory, it will take the country 3 decades to double its per capita income.
According to the IEA Boss, the country’s growth forecasts have depended so much on historical data which makes it difficult for projections to reflect the true structure of the economy.
Commenting on the macroeconomic projections for 2022, the IEA Boss believes Ghana has what it takes to even grow more than the forecast 5.8 percent next year but has not been able to exploit its excess capacity.
Director of Research at the IEA, Dr. John Kwakye, underscored that most of the targets for next year are not sufficiently ambitious, because the country is blessed with many natural resources which has not been sufficiently tapped.
Underestimations of targets
To him, a 5.8% GDP growth, an end-year inflation of 8% and a gross international reserves of more than 4 months of import cover are actually underestimations because the country’s capacity, if well explored, should yield better results than the projections.
“If you look at the medium term growth target of 5% per annum, we are growing below our target. Now, Ghana is capable of growing much faster than what it is doing; It’s a matter of resources.
“It is because we base all these projections on historical performance. We look at our historical performance and the structure of our economy and say this won’t change. We can only achieve this rate of growth and estimates if we work harder.”
“I have done estimates which say that it will take over 30 years to double our capita income which is roughly $2000 a year. In 30 years, we will have per capita income of $4000 when some countries per capita income is over $50,000. So if you ask about this target, I’ll say they’re not substantially ambitious”.Dr. John Kwakye
Need for judicious use of resources
He further added that “we have excess capacities and resources that need to be tapped judiciously. When you tap it and waste it and give it to foreigners cheaply, you’re not going anywhere”.
Estimates from the Ministry of Finance show that the Ghanaian economy grew at 6.2% and 6.5% in 2018 and 2019 respectively. However, the pandemic has derailed the country from its strong growth path, as it escaped recession with the skin of the teeth last year, managing a 0.4% growth rate.
Growth is now estimated at 4.4% in 2021 and 5.8% in 2022. Even though the country’s growth rate has declined last year, it was better than the ECOWAS sub-region which contracted by 0.6 percent. The IMF expects Ghana to rebound stronger at 6.2 percent in 2022, higher than the ECOWAS sub-regional average forecast of 4.0 percent next year.
An improvement in the per capita income is deemed as improvements in the living standards of the citizens even though there are concerns about using this indicator as a measure of living standards.