Industrialists Hopeful Of Economy Rebound

An industrialist says, despite the current economic woes of the country, most of the industry players have confidence in the long term viability of the Ghanaian economy.

The Managing Director of Unilever Ghana, Ms. Maidie Arkutu, is highly optimistic that, the economy of the country will get back to it normalized track and this will propel the country into formidable force in the West African sub region.

“Many organisations such as Unilever have strong confidence in the long term viability in the economy of Ghana, nonetheless, we have to address the economic challenges,” she said.

The economy has suffered major shocks, key of which are declining commodity prices, energy challenges and increased inflation which has reduced the confidence of most businesses in the country.

But, on a quick note, MsArkutu said despite the confidence, it was also necessary for the challenges to be fully addressed.

The Deputy Minister of Finance, MrCassielAtoForson, has said Ghana has successfully reduced its deficit of 8.2 per cent of Gross Domestic Product (GDP) in 2012 to 4.0 per cent in 2014.

This, he said, was due to the prudent fiscal management and the government’s commitment to fiscal consolidation and debt sustainability.

“Due to a combination of global factors and domestic challenges, the economy has been under severe stress since 2012, leading to double digit fiscal and external current account deficits,” he said.

According to him, Ghana had witnessed significant economic growth over the past decade, with real GDP growth rising steadily from 3.7 per cent in 2000 to 11.5 per cent in 2011 before decelerating to 4.0 per cent in 2014 mainly on account of energy challenges.

It is a known fact that, most businesses in the country have felt the full brunt of the unstable power, devastating exchange rate and high interest rate situation over the last year which had led to the collapse of some businesses while others incur extra cost in order to remain in business.

Inflation has also been on the ascendancy since the beginning of the year, with the latest figure being 16.9 per cent for May 2015. The rising inflation is as a result of the pass through effect of increase in petroleum prices and the depreciation of the cedi.

According to MsArkutu, plans to restore confidence in the economy as outlined by the Finance Minister, Mr Seth Terpker, had commenced and, therefore, it was only a matter of time for the positive impact to be felt.

“I was very much comforted with the various short term and medium term solutions around each of those economic shock elements mentioned earlier. You do not only get to understand the issues but you also know the root cause and the short to medium term plans to address them,” she said.

She further said, “I say this for myself and I am sure that the discussion has really addressed the key issues and opened our understanding of what is going on in the economy.”

In a recent survey conducted by the Association of Ghana Industries (AGI) showed that business confidence in the first quarter of 2015 had dropped significantly.

Per the findings of the survey, the business confidence index dropped to 85.0 in Q1, 2015 from 98 points in Q4 2014.

The drop was as a result of the impact of the economic challenges prevailing currently in the country, particularly, the power crisis and the depreciation of the cedi which is adversely affecting businesses.

The Business Barometer Indicator (BBI) of the AGI is a proprietary tool that measures the level of confidence in the business environment and predicts short-term business trend.

To a large extent, businesses expect the measures promised by the government to materialize in the short to medium term to ease the incessant pressure on high energy cost, high utility cost, fast depreciating cedi, among other things on their businesses.

Moreover, the deputy finance minister had said that, over the medium term, economic growth was expected to pick up to 9.2 per cent in 2017, with inflation reducing to 8.2 per cent while the fiscal and current account deficits would be reduced to 3.7 per cent and 4.9 per cent of GDP respectively in 2017.

“The primary fiscal balance is expected to start recording surpluses of 0.5 per cent of GDP in 2016 and 2.0 per cent of GDP in 2017. All these will contribute to a build-up of reserves to cover 4.2 months of goods and services by 2017,” he said

Mr. Forson said the government had been implementing measures to stablelise since 2013 and had set the economy on a high growth path.

According to him, although those measures had helped to improve the situation, “new and continuing adverse global and domestic developments such as the gold and oil price declines and energy challenges continue to pose challenges to economic management.”

MrForson said due to improved revenue administration and compliance, as well as the implementation of efficient tax policy measures, “Ghana’s non-oil tax revenue to GDP ratio has increased from 15.8 per cent in 2013 to 17.1 per cent in 2014 and it is estimated to reach 18.8 per cent by the end of 2015,” pointing out that, it had been achieved in a period of economic slowdown.

The wage bill as a ratio of GDP has also reduced from 8.9 per cent in 2012 to 8.7 per cent in 2013, 8.3 per cent in 2014 and was expected to decline further to 7.7 per cent in 2015.

“As a ratio of tax revenue, the wage bill has declined from 53.3 per cent in 2012 to 49.1 per cent in 2014 and it is expected to reach 44.5 per cent in 2015”.

“Similarly, the wage bill including wage arrears cleared as a ratio to tax revenue has declined from 68.2 per cent in 2012 to 65.1 per cent in 2013 to 52.1 per cent in 2014 and expected to decrease further to 46.1 per cent in 2015,” he stated.