Projections that Ghana’s economic growth will pick up in 2016 seem to be supported by latest figures from the Ghana Statistical Service (GSS) which show that gross domestic product (GDP) grew by 4.9 per cent year-on-year in the first quarter of 2016 on the back of robust service sector activities.
The Minister of Finance, Mr Seth Terkper, told the Daily Graphic in an interview in Accra yesterday that the first quarter GDP growth was a reflection of the consolidation of Ghana’s turnaround story.
“If you put this together with the exchange rate stability experienced for this year, there is a clear indication that we are poised to meet our macroeconomic objectives.
This is good news and a necessary boost of confidence for investors, development partners and the entire Ghanaian population. We thank all Ghanaians who have borne with us during the fiscal consolidation process.
“We want to assure everyone that the President and the entire government are committed to the macroeconomic turnaround and consolidation of the turnaround clearly points to the fact that our policies are bearing the right fruits,” he said.
The better-than-expected results point to a potential recovery in growth in the economy, after sharp declines in 2014 and 2015.
The first quarter growth of 4.9 per cent for 2016 compares to 4.5 per cent, negative 3.8 per cent and 0.9 per cent for the same period of 2015, 2014 and 2013, respectively.
First quarter performance
The trend puts the first quarter performance ahead of developments over the past three years and points to a potential out-performance of the 2015 GDP outcome of 3.9 per cent, with the economy appearing to be on track to achieving the 5.4 per cent target set for the year.
Within the sectoral growth rates, the services sector recorded the highest growth of 8.8 per cent, the agricultural sector followed with 2.8 per cent and the industry sector, negative 1.1 per cent.
Agriculture saw increased growth in crops, livestock and forestry, while the industry sector benefited from ICT, real estate, hotels, restaurants, trade, transport, education, finance and health services.
Factors supporting the growth recovery include improved electricity supply since the beginning of the year and the successes achieved in ongoing fiscal consolidation, reflected in a decline in the budget deficit from 10.2 per cent of GDP in 2014 to 6.7 per cent of GDP in 2015.
The recovery in growth bodes well for public finances because it will likely boost tax collection, as higher growth means a lot more economic activities.
With the oil sector suffering from a price shock to exports and the expected short-term effect of fiscal consolidation, Ghana’s growth slowed down to four per cent in 2014 and 3.9 per cent in 2015.
But the government forecast a recovery to 5.4 per cent in the 2016 budget, with expectations that growth will return to much higher levels of 9.9 per cent in 2017 and 9.3 per cent in 2018.
The coming on stream of the Tweneboa-Enyenra-Ntomme (TEN) oilfields later this year is one of the drivers of the expected growth recovery, together with the positive effects of fiscal consolidation, which are expected to lead to a more stable macro-economy.
A key challenge for the economy continues to be high inflation, which stood at 18.9 per cent in May this year, but the central bank has expressed confidence that inflation will fall in the second half of 2016.
The bank also expects price growth to fall to under 10 per cent by the first quarter of 2017.
As Ghana goes into elections later this year, there is much interest in seeing fiscal consolidation strengthened, in spite of expected spending pressures.
Reflecting the government’s publicly expressed commitment to achieve this goal, the budget deficit target for 2016 has been set at 4.8 per cent of GDP, which is tighter than a previous estimate of 5.3 per cent.