BoG uncertain about Ghana’s future

Ghana’s snail pace growth process is causing serious threat to achieving significant transformation in the lives of the people and for government to achieve its “Better Ghana Agenda.”
Current development in the Bank of Ghana’s Composite Index of Economic Activity (CIEA), gives a clear indication that the agenda set by the Mills administration to reduce fiscal deficit will be seemingly impossible as the economy struggles to meet revenue targets.
Although, CIEA, which the Bank of Ghana uses in gauging the trend of economic activity, recorded a real growth of 3.5 per cent compared with a growth of 2.5 for the corresponding period of 2009, the growth rate is purely insignificant.
Ghana should brace itself for a major risk that could have a potential impact on the fiscal-driven aggregate demand pressures on the economy.
The fiscal outlook of Ghana’s economy could be challenged driven by renewed pressures from the public sector, as government introduces the Single Spine Salary Structure (SSSS).
A critical assessment of the latest review on the economy for the third quarter by the Monetary Policy Committee (MPC) of the Bank of Ghana revealed that the Ghanaian economy was operating below its potential.
“On growth, the committee noted that current developments in the Bank of Ghana’s CIEA point to weak conditions.
The sluggish pace in economic activity has implications for economic growth in the non-oil sector in 2010.
The anticipated slow growth in the GDP 2010, emanating from signals in the CIEA implies that the process of fiscal consideration may be delayed as tax revenue targets may not be achieved.”
The Governor of the Bank of Ghana, Paa Kwesi Amissah Arthur, told Today newspaper that if the demands from the public sector is not moderated and managed to ensure that fiscal programmes undertaken by government remain within acceptable targets, the economy might face dreadful challenges which can have negative impacts on the success chalked so far.
Government budgetary operations at the end of August recorded a narrow deficit on cash basis of GHS1.24 billion (4.8 per cent of GDP) marginally exceeding the target of GHS1.21bilion (4.7 per cent of GDP).
The overall net domestic financing (NDF) deficit of GHS1.6 billion (6.2 per cent of GDP) was recorded which included GHS445.0 of TOR debt.
It is however feared that the SSSS could change the picture in the next quarter.
The controversial GDP growth rate for 2009 which was said to be 4.7 per cent was corrected by the Governor, “the Ghana Statistical Service has now stated that the GDP growth rate for 2009 was 4.1 per cent and not the 4.7 per cent it had earlier projected.
While the agricultural sector in 2009 grew at the same pace as it did in 2008, the industrial and services sectors grew at a slower pace, thus contributing to the lower than anticipated growth.”
The Central Bank’s periodic survey, which previously indicated an improved business and consumer confidence, this time around in the latest survey gave mixed results.
Overall business confidence has been positive for most of the year although there was a marginal dip in August 2010.
Businesses assessment of trends in interest rate and consumer price movements were favourable.
However, businesses were less optimistic about the realization of government’s growth target for the year.
After declining marginally in the June 2010 survey round, overall consumer confidence rebounded during August 2010, driven largely by an improved economic environment, declining inflation situation and improved food supply conditions.