The latest economic figures have revealed a growth rate of 6.9% which has sparked significant discussions about how the data was computed and what it says about the state of Ghana’s economy.
The government, during a press conference, attributed the strong growth to production output rather than consumer spending patterns. However, Prof. Patrick Asuming, an economist, offered a deeper dive into these figures and provided insights into the economic context surrounding this development.
Prof. Asuming began by explaining the three main ways to calculate GDP. These are GDP by production, GDP by expenditure, and GDP by income.
He clarified that the government’s report is based on the production approach, which focuses on the contribution of different sectors to the overall economy. This approach is distinct from the expenditure approach, which evaluated how the GDP is used and who is purchasing the goods and services produced.
“When you do GDP by production, that’s where we’re able to say which sectors are contributing what. But when you look at the GDP by expenditures, then you’ll be able to say, so the GDP, when we produce it, how is it used and how is it purchased?”
Prof. Patrick Asuming an Economist
This distinction is essential in understanding why the government emphasized production over consumption. Prof. Asuming pointed out that household consumption has declined in recent quarters, which supports the government’s focus on production as the driving force behind the 6.9% growth rate.
The State of the Economy: A Mixed Bag
While the 6.9% growth figure has garnered much attention, Prof. Asuming cautioned against drawing overly optimistic conclusions about the economy’s health. He acknowledged that this is the highest quarterly growth rate in years and that fewer sectors are experiencing contractions compared to previous quarters.
“I think it’s definitely the case that the growth rate that we’ve seen is much higher than most projections, and it’s the strongest growth we’ve seen in a long time… But I think to jump on that to sing the song that we are back or in recovery is too much of a stretch.”
Prof. Patrick Asuming an Economist
He emphasized that although the growth rate is a positive indicator, it does not signal a full economic recovery. The economist urged caution and a deeper examination of the factors contributing to this growth.
Government’s Role and Sectoral Analysis
Prof. Asuming acknowledged that some sectors, particularly electricity production, have seen significant improvements, which could be attributed to government efforts. He noted that electricity production saw a strong recovery after experiencing contractions in previous quarters, and this may have contributed to the improved growth figures.
“Electricity production is not something you can hide. When it wasn’t doing well, we saw the lights were not staying on. It appears that, especially in the second quarter, the lights have been on, and the electricity production numbers too support that.”
Prof. Patrick Asuming an Economist
However, he also pointed out that other important sectors, such as cocoa, have not performed well. Cocoa saw a 26% decline, which Prof. Asuming described as “quite catastrophic.”
This highlighted the uneven performance of various sectors within the economy and underscored the need for a more nuanced understanding of the growth rate. Prof. Asuming stressed that while the growth rate is impressive, it does not reflect improvements in the standard of living for ordinary Ghanaians. He noted that inflation, though it has decreased, remains relatively high and that the sectors leading the growth, such as mining and oil, do not have a significant impact on the average Ghanaian due to low local participation in these industries.
“When those sectors are the ones leading the growth, then its impact on ordinary Ghanaians tends to be lower. We also have to consider the employment elasticity of the growth. How much does the increase in growth promote jobs? I think those are the important thing for ordinary Ghanaians.”
Prof. Patrick Asuming an Economist
He argued that the growth figures must translate into improved living conditions and job creation for them to be meaningful. Without this translation, the growth is merely a statistic that does little to benefit the average citizen.
Policy Recommendations for the Government
Looking ahead, Prof. Asuming provided some recommendations for the government to consider. He advised that the government should not view growth and inflation figures as ends in themselves, but rather as means to improve the lives of ordinary citizens. He stressed the importance of reworking the economy to reduce its reliance on foreign control and ensure that growth benefits more Ghanaians.
“Growth has to translate into living conditions. It has to translate into people’s day-to-day life. When you have growth numbers showing that employment is not rising… or many more Ghanaians are falling into poverty, it tells us that we have to rework the economy to work for the ordinary person.”
Prof. Patrick Asuming an Economist
Prof. Asuming emphasized that while the growth rate is encouraging, it should not be used as an excuse to become complacent. The government must focus on creating a more inclusive economy that benefits all Ghanaians, not just a select few sectors. We shouldn’t base on that and conclude that we are out of the woods. We are by no means out of the woods.” Prof. Patrick Asuming’s analysis of the 6.9% growth rate provided valuable insights into the current state of the Ghanaian economy. While the figures indicated strong growth, especially in the production sector, he cautioned in interpreting these numbers as a full recovery. The government must focus on ensuring that this growth translates into improved living conditions and job creation for all Ghanaians.
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