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30.10.2008 General News

Economic growth sustainable


Concerns about the country's economy are on the sustainability of progress rather than the probability of collapse, says Professor Tony Killick, a Senior Research Associate of the Overseas Development Institute, UK.

Macroeconomic stabilization achieved since 2003, which saw inflation falling from about 30 percent to below 10 percent in 2006, but currently at 17.89, according to Prof. Killick, offers Ghana a real opportunity at expanding its economy.

"It was not until around 2000 that average incomes were restored to the level of 1960, but since then, they have grown by an average of about two-thirds. The most recent years have been a period of rapid improvement," he said.

"Agriculture has begun to share in the economic expansion, with important implications for the reduction of poverty. Private investment has been rising fast and that has been creating a lot of new jobs, so employment too has been rising."

Results from a recent World Bank research on 'growth accounting' indicates that, in relation to national income, private investment has tripled over the last decade.

"The costs of creating and running a business have been going down. There is also the fact that the state has been pre-empting a far smaller share of bank credit, leaving more for business borrowing."

Prof. Killick made these observations last Thursday in Accra, during the monthly series of Economic Development Lectures, organized by the Department of Economics, University of Ghana, when he addressed the topic 'Can' Ghana's Economy Go on like this?'

He says that the improvements in the country's macroeconomy have mainly been driven by domestic, rather than external influences.

"In terms of trade, the country's economic collapse in the 1970s, for example, happened in the face of generally favourable terms of trade. Then the recovery of the rest of the 1980s happened even though world prices moved sharply against Ghana.

"Also accelerated economic progress of the most recent years has been achieved against a backdrop of broadly flat trend in terms of trade."

Apart from a burst of investment in the mid 1980s in gold mining, the contribution of private capital from abroad has been small, he says adding; "the large rises in private investment have been domestic in origin, not because of capital of multinationals."

Prof. Killick, however, acknowledges that contributions of the Ghanaian Diaspora have been tremendous, rising from $0.5 billion in 2000 to $1.8 billion in 2006, a nearly four-fold increase.

He identified obstacles to Ghana's sustained economic growth as including deficiencies in power supply, as well as other critical infrastructure, a shortage of skills, unreformed, largely redundant civil service, land tenure challenges and inadequate financial services.

The political challenge continues to be the system that is largely driven by patronage, he explained saying; "instead of the state being an instrument governed by explicit objectives and legal rules, it is effectively an apparatus serving the interests of the particular groups."

The Economic Development Lecture series is designed to draw public attention to the problems of, and feasible solutions, to economic growth, development and poverty.

Source: B&FT