Ghana’s Economy in Recession in last 38years and Still Highly Risk Vulnerable

The government actions and inactions had pushed Ghana’s economy in to recession in 38 years with economic growth of only 1.1% in third quarter of 2021. The National Democratic Congress (NDC) handed over an economic with huge capital investments (i.e. aviation, energy, health sector etc.) averaging annual growth rate of 6.5% of the Gross domestic product (GDP). However, the economy could not withstand a flash shock (Covid-19), and this had exposed the extent of risk vulnerable our economy was treading despite the government claims that economy was booming and in good health. The poor management of the economy had lowered the standard of living of Ghanaians over 10% (thus, the real per capita income alone), and poverty is on the rise in all corners of the economy. In Contrast, the government acclaimed prudent management of the economy is unsubstantiated if we consider the enormous capital inflows in 2020/2021 alone in reference to the current state of the economy.

Brief analysis on some indicators, spending $3.5billion on cleaning-up the financial sector has widened the unemployment gap among the youths since almost all indigenous banks in country was closed-down instead of helping these banks to survive and to save jobs. We should not forget that, these indigenous banks are mainly the heart of Small and Medium Enterprises (SMES) through easily-accessible soft-loans for start-ups and petty trading. Also, the banking clean-up had impacted seriously on the fiscal positions of Ghana and of course there were other considerable and risk-weighted approaches the government could have used in handling of the banking crisis.

For example, the fiscal deficit (incl. energy and financial sector costs amounted close 8% of the GDP as of 2019.Factforward, in 2020 when the Covid-19 shock overpowered our economic growth to drastically shrink to 0.4% which is far lowest in recent decades and lower than even our regional peers, and this reflected fiscal deficit of 16.2% of the GDP.

However, putting these and other indicators on Debt Sustainability Analysis (DSA), Ghana is still classified as High Risk of Debt Distress coupled with high risks vulnerabilities, and accompanying an outlook of Negative Credit Rating (CR) across board by almost all the rating agencies such as Fitch (B-), S&P (B-), Moody’s ( B-) which comes at the backdrop of rapid deteriorating of public finances (excessive borrowing), pilling-up public debt levels and with historic tax collection and unprecedented capital inflows (revenues).

I hope that government wakes up to the real-time harsh living conditions of the good people of Ghana with a relieving policies instead of the over-reliance on the Central Bank’s intervention in getting the indicators RIGHT.

Thank you & God bless Ghana, God bless

By: Evans DARKO, Researcher, CREM LAB, France.

   Comments0