Economic Growth Projected To Hit 6.8%
The Ghanaian economy is expected to grow at a rate of 6.8 percent, a 0.2 percentage points lower than the projected target for this year.
This will mean the total goods and services to be produced within the economy this year will reach GH¢16.97 billion.
The services sector, especially the financial segment, which has seen immense growth so far according to analyst, may contribute significantly to the upward growth.
Government in the 2007 budget projected a gross domestic product (GDP) of 7 percent but external factors such as rising crude oil and food prices have impacted significantly on the outlook of the economy.
However, according to a research conducted by Databank Group Research, Ghana's economy will not only reach 6.8 percent growth but will also see its foreign exchange reserves recording a 2.6 months of import cover, compared to the targeted 3.42 months of import cover.
Headline Consumer Inflation which hit 18.41 percent in June 2008, the first in over a year, is expected to record 18.49 percent at the end of the year with the Central Bank benchmark indicator, the prime rate, closing the year at 17.5 percent, more than the current 17 percent.
The cedi is also expected to depreciate by 11.05 percent against the major foreign currencies as compared to the projected 4.03 percent.
According to Databank Group Research, the economy will accelerate mainly on account of favorable export prices and strong domestic demand.
On inflation, the analysis stressed that since external volatility persists in the global economy, it did not expect the goal of single digit inflation to be achieved by the end of the year. However, its end-year forecast for inflation is within the band of 17.5 percent and 18.49 percent.
Instructively, the study cautioned that inflation could rise above 21 percent by September if the current fiscal mitigating package is not sustained and transport fares remain unstable.
On exchange rate outlook, the local currency which depreciated against the pound and the euro by 5.9 and 11.63 percent respectively by June 2008 will depreciate further during the year due to further increases in the price of crude oil and an easing in foreign private portfolio funds into the country during the second half of the year.
Overall, it expects the cedi to depreciate against the dollar by 11.5 percent in December.
With regard to the fiscal policy outlook, introduction of the Communications Service Tax in June, the government of Germany's £39 million concessional loan and grant, as well as the renewed inflow of financial assistance from the World Bank may improve government tax revenue in the second half of the year.
The inflow of divestiture receipts, especially from the sale of Ghana Telecom, will also enhance fiscal stability.
Growth in fiscal expenditure is likely to further outpace domestic revenue mobilization in the second half of the year; and therefore it expects government's fiscal balance to close the year at a deficit of 14.5 percent of GDP.
As at the first half of the year, government's fiscal deficit as a percentage of GDP stood at 2.94 percent by March compared to 0.91 percent for the same period in 2007.