A Chartered Economist and Lecturer at the Central University College (CUC), Mr. Kofi Korle, has stated that the third wave of the COVID-19 will not have any significant impact on the country’s positive economic outlook for 2021.
According to him, the recent vaccine rollout in the country will mitigate any threats emanating from the spread of the disease. As such, he is optimistic that the country will meet its revised growth projection of 5.1 percent in 2021.
“The third wave of COVID-19 is not a major threat. As at now, the third wave, even though its spreading faster, it has not really spread compared to the first wave. Production of vaccines globally is expanding, so, it will not be a problem. The third wave will not be a problem”.
Mr. Korle
The government, in the mid-year budget review, revised Ghana’s growth forecast for 2021 to 5.1 percent from an earlier forecast of 5.0 percent. This was after reviewing recent developments in the global and domestic economies.
Uptick in the global economy
Moreover, Mr. Korle stated that the global economy is picking up steadily. According to him, most of the big economies are returning to normal economic activities. As such, he expressed optimism that since Ghana’s economy is very much open, the trickle-down effect will be positive. He therefore, backed the government’s decision to revise the growth rate upwards.
“Very soon we will see developing countries also going full scale, getting back into normal economic activity. When that happens, remember growth rates in developing countries appear to be higher than even in developed countries.
“Based on that alone, I will even give a higher projection. But even though it’s up by point one, point one percent in terms of economic activity is still significant. So, it’s possible. The outlook is positive and so the government’s expectation is plausible and is achievable”.
Mr. Korle
Other risk factors to the outlook
Meanwhile, aside the third wave of COVID-19, two other major risks to the outlook include fiscal pressures and inflation. Currently, the country’s inflation is rising, standing at 9.0 percent as of End-June 2021. However, commenting on its possible risks, Mr. Korle indicated that the impact of the rising inflation on growth will depend on how spending units respond.
“So, it depends on how, on the aggregate, we the spending units will respond. If we continue to purchase or when aggregate consumption increases, then it’s going to impact positively on the economy. In an era of inflation, as we keep spending more, it will motivate firms to also increase output. And with time, these mild inflationary pressures could ease”.
Mr. Korle
On the contrary, he explained that if consumers decide to cut down consumption, then firms will also respond by cutting down production. This, according to him, could worsen inflationary pressures, impacting negatively on the positive outlook.
Containing inflationary pressures
Meanwhile, despite the rise, Mr. Korle stated that inflation is still within the Central Banks’s target band of ±8 percent. This notwithstanding, to reduce the inflationary pressures, Mr. korle urged the government and the central bank to work hand-in-hand. He argued that keeping interest rate at its lowest minimum will serve as an incentive for firms and businesses to borrow for investment.
“So, I will urge the government and the central bank to work together to keep the interest rate where it’s now 13.5% or even lower. They should work together to bring the cost of doing business to its lowest possible”.
Mr. Korle
Furthermore, Mr. Korle urged thegovernment to invest in productive sectors. According to him, this is critical to revive the economy and make it stronger. He cited the agriculture sector as one of such sectors.
“So, government should invest in the productive sectors. Government is already working with policies such as Planting for food and jobs. It should be rekindled, it must be revamped to improve food security in terms of our crops and staple foods”.
Mr. Korle
Additionally, Mr. Korle advocates the reduction oftaxes on certain imports, especially imports of raw materials and intermediate goods. He explained that most domestic firms use these materials in their production. According to him, a reduction of such taxes will reduce cost of production and also increase productivity to aid the recovery process. Economist Economist Economist
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