A Senior Research Fellow at the Institute of Fiscal Studies (IFS) has cast doubt on Ghana meeting its projected 5.1% GDP growth this year considering the pace of recovery after the first half of the year.
According to Dr. Said Boakye, economic activity is rebounding at a slower pace than earlier anticipated even though it’s better than what the IMF has projected. This, however, contradicts the Bank of Ghana’s assertion that the economy is recovering faster than it expects.
“The pace of recovery in Ghana in the past two quarters is about what is projected by the IMF for the whole sub-Saharan Africa, which is not bad. However, it’s slower than what was expected for the country. The growth momentum, therefore, needs to pick up”.
Dr. Said Boakye
Meanwhile, with an average growth rate of 3.5% in the first 6 months of the year, Dr. Said noted that meeting the growth projection anchors heavily on the performance of the oil sector in the second half.
“The overall growth of the economy is being held back by the oil sector, even though the non-oil sector is doing just fine. It is hard to believe that the economy will be able to achieve the projected 5.1% growth rate for the year, unless the oil sector returns to strong positive growth in the next half of the year”.
Dr. Said Boakye
Need to scale up oil production
Provisional GDP figures from the Ghana Statistical Service (GSS) show that Ghana’s economy expanded by 3.9% in Q2 2021. This represents a 0.8 percentage points improvement over the 3.1% expansion recorded in Q1 2021.
Unsurprisingly, the major drivers of the second quarter growth were the Services and the agriculture sectors. Of major concern, however, is whether the economy is expanding in the direction that would create jobs for the teeming unemployed youth.
Dr. Said, sharing his view on the concern, told The Vaultz News that the industry sector needs to pick up to complement the services sector to create the jobs.
“It is good that the service sector growth is rebounding strongly, creating the opportunity for job growth. However, the industrial sector needs to return to strong growth to complement the service sector in terms of job creation”.
Dr. Said Boakye
Meanwhile, to consolidate the ongoing recovery, Dr. Said urged the government to put measures in place to enhance oil production.
“The government has to put pressure on the oil producers to significantly increase oil production during the second half; in it addition to helping to boost GDP growth, that is needed for revenue mobilization purpose”.
Dr. Said Boakye
Second quarter growth composition
Ghana’s economy continues to show signs of a rebound after it recorded a marginal growth of 0.4% last year. In the second quarter of the year, the Services sector recorded the highest growth of 11.0%, up from 4.0% in Q1 2021. Also, Agriculture expanded by 5.5%, up from 4.3% in Q1 2021.
However, it is worrying that one of the sectors which has huge prospects of creating employment for the teeming youth continue to suffer heavily from the effects of the pandemic. The industry sector contracted by 4.3% in Q2 2021, despite recording a marginal expansion of 1.3% in Q1 2021.
Industry’s poor performance was as a result of a deep contraction of 18.9% in the Mining & Quarrying sub-sector. A strong growth of 20.5% in the Water & Sewerage sub-sector couldn’t hold back the sector from slumping. Nevertheless, the share of the Oil & Gas sub-sector of the industry increased to 16.1% in Q2 2021 from 10.6% in the corresponding period last year.
Also, the construction sub-sector recorded a marginal growth of 2.4% in the second quarter of the year. At this growth rate, it will be very difficult for the country to close its huge housing deficit estimated at 5.7 million rooms, according to the Centre for Affordable Housing Finance Africa.
More Optimism but uncertainties persist
However, Professor Peter Quartey, Director of ISSER in an interview, described the second quarter growth rate as encouraging. He expressed optimism that Ghana may grow at 5% this year.
Be it as it may, he urged the government to continue its investment in the real sector. The ISSER Boss was particularly elated by the growth in the manufacturing sub-sector as it continues its gradual recovery. The sub-sector expanded by 8.3% in Q2 2021.
“I’m encouraged by the fact that manufacturing is growing at an average rate of 5% because majority of the people are employed within this sector. And therefore, it is quite encouraging that if that sector is growing, it is likely to employ more people, so we reduce the unemployment rate”.
Professor Peter Quartey
Notably, the contraction in the Mining & Quarrying sub-sector may be due to the government’s efforts to clamp down on illegal small scale mining. Yet, the sluggish growth in the two main job-creating sub-sectors, manufacturing and construction, remains a major headache. Expansion in these two sectors will have a direct effect on the economy as a large group of people will benefit. This will create Jobs, income levels will improve, leading to an ultimate reduction in poverty rates.
Need for targeted interventions
This, therefore, means that government must continue to support targeted sub-sectors within the economy, especially in the industry sector. Key, is the need for the government to continue to support its industrialization agenda through massive investment in the One District, One Factory (1D1F) initiative.
From the Q2 GDP figures, Heath & Social Work sub-sector of the Services sector recorded a gargantuan growth of 22.5%. This means that government should pursue its intentions to manufacture COVID-19 vaccines in the country. It can also invest in the production of more PPEs to meet domestic demand. This will then create more jobs whilst opening up the economy for a stronger rebound.
Moreover, for industries to thrive, the government must also strengthen its flagship program in the Agriculture sector, the Planting for Food & Jobs (PFJs). This will help meet domestic food demands which currently remains unstable. Growth rates of 4.5% and 5.7% for crops and Livestock respectively in Q2 2021, means the government needs to do more in ensuring food security.
Also, investment in agriculture is vital because it will provide raw materials and intermediate goods for the industry sector. This is particularly so when most of the factories under the 1D1F initiative are agro-based.
Furthermore, scaling up efforts to vaccinate majority of the population of Ghana will also play a significant role in the recovery.
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