A leading think tank, Institute of Economic Affairs (IEA), expressed fears here on Thursday about Ghana’s ability to attain its growth rate targets for 2017.
In their reaction to the mid-year budget review presented by Minister of Finance Ken Ofori-Attah, Senior Adjunct Research Fellow at the IEA, Eric Osei-Assibey, said although the performance of government’s fiscal consolidation program was impressive, lower growth in non-oil sector and high lending rates by commercial banks could hamstring the economy.
“Although the targeted growth of 6.3 percent is attainable on the back of rising oil production and the benefits of macroeconomic stability, downside risks persist, particularly from the non-oil sector,” the economist pointed out.
In its First Quarter (Q1) Gross Domestic Product (GDP) for the country, the Ghana Statistical Service (GSS) announced a modest 3.9 percent non-oil sector growth, compared with the 6.3 percent recorded for the same period last year.
“Government has projected a 4.6 percent non-oil sector growth at the end of the year 2017. However, we think that the chances of missing this target are high because of the negative effects of government’s plan to cut expenditure by 1.1 percent of GDP from 58.1 billion Ghana cedis to 55.9 billion Ghana cedis,” he added.
The central bank has since the beginning of the year slashed its benchmark policy rate by 450 basis points, and Treasury Bill rates have also fallen to about 12 percent, yet bank lending rates have remained above 23 percent.
The high lending rate is inimical to economic growth as it inhibits private sector growth and thereby constrains domestic investments and production expansion of the economy. We think government is on track in achieving macroeconomic stability as most of the macro-economic indicators are moving in the right direction
“The challenge however is the sustainability of these gains which means more needs to be done,” Osei-Assibey maintained. Enditem