The Economist Intelligence Unit (EIU) has praised the government of Ghana’s industrialisation agenda under its flagship One District One Factory initiative and the banking sector clean up.
In its latest country report on Ghana which also analysed the impact of the COVID-19 pandemic on the Ghanaian economy, the EIU indicated that, the programmes of the government will contribute greatly to the strengthening of the Ghanaian economy, even though the country’s economy has been hit by the effects of the pandemic, just as other countries in the world.
“With key revenue targets plummeting, including a sharp drop in oil revenue, the EIU noted that the industrialisation drive and the banking clean-up will help in non-oil growth. The government’s industrialisation push and moves to strengthen the banking sector will benefit non-oil economic growth, although the cost of capital will remain a constraint.”
In furtherance, the EIU observed that the government’s aim to massively industrialise the country’s economy has been enormously stalled by the onset of COVID-19.
However, the Unit’s report is optimistic that the ambition to industrialise will be sustained and advanced, albeit contingent on the reelection of the incumbent government, which it has predicted. The continuation of the creation of industries, according to the EIU will serve as a catalyst for the strengthening of the Ghanaian economy.
“The NPP’s plans for more rapid industrialisation have been temporarily overshadowed by the coronavirus.”
“In particular, progress on the NPP’s flagship One District, One Factory (1D1F) initiative has been patchy, with results generally falling behind targets. If, as we expect, the NPP is re—elected, we believe that there will be an attempt to breathe fresh life into the initiative.”
With regards to the general outlook of the Ghanaian economy post COVID-19, the EIU predicted a positive real GDP growth in 2021, a slower pace of depreciation, lower inflation among other positive forecasts.
Regardless of the positive predictions for the country post COVID, the EIU has forecasted a more worrying economic situation for the country for the rest of 2020.
The Unit has projected that, the economy will contract by 4.1 percent which is far lower than what the government has projected. Inflation will also end the year at 11.3 percent. The cedi has also been projected by government to end at 5.73 cedis by the end of the year but the EIU has forecasted the cedi to depreciate by 5.83 cedis.
Coronavirus impact on global economy
However, the EIU’s analysis and verdict of the impact of Coronavirus on the global economy predictably dire.
“We forecast that global output will contract by 4.8% year on year in 2020 and that global trade will decline by 22.6%. Global GDP will not recover to pre-coronavirus levels before at least 2022; 2020 and 2021 will be lost years for growth.
“Real GDP will contract in all regions of the world, but the drop in output will be especially severe in OECD countries. All G7 countries and almost all G20 countries will experience a full-year recession in 2020. We expect China’s real GDP growth to slow sharply to 1.4% this year and forecast a full-year recession in the US, with a contraction of 4.8%. We assume that oil prices will decline by more than 37% this year, to average US$40/barrel.
“Most countries have responded with huge fiscal expansion to support businesses and households, raising the risk of sovereign debt crises in the medium term. Central banks have cut interest rates and, more importantly, have stepped up as buyers of last resort for government and corporate debt. Europe is heading towards a historic recession this year.”
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