Economic Growth To Slow Down

Dr Kwabena Duffuor With a frightening downward turn in global economic trend which is expected to hit the African economy, Ghana's economic growth is expected to slow down this year according to a research conducted by Databank Group.

CITY & BUSINESSS GUIDE gathers that the Gross Domestic Product (GDP) of the country would fall by 0.4 percent in 2009 though the research work is yet to be made public.

According to a revised data of the 2008 growth rate of the country, the economy recorded 6.2 percent as against the September 2008 projection that pegged it at 6.7 percent- meaning the economic growth fell by 0.2 percent since 2007. The economy recorded 6.4 percent despite the energy crisis.  

The GDP recorded 3.7 percent in 2000 but reached its peak in 2003, 2004, 2005, 2006 and 2007 where it recorded 5.2, 5.6, 5.9, 6.2 and 6.4 percent respectively.

The rate of growth slowed down in the final quarter of 2008, according to the Government Statistician, Dr. Grace Bediako, who indicated that economic activity for the period was dominated largely by buying and selling which added little value to growth.

In addition, manufacturing slowed in the final quarter, possibly as a result of earlier hikes in petroleum, whilst agriculture and the services sector maintained momentum.

But with the recent scary global financial crunch still ballooning into countries such as South Africa and Angola, how will government's fiscal and monetary policies cushion the country against shocks?

Since the last quarter of last year the economy has been reeling under the heat of the global crisis with some macroeconomic variables losing steel. Inflation had shot up to 18.13 percent culminating in an increase in interest rates.

Similarly, the lending rates of banks have also surged up to an average of 26 percent whilst the cedi has been loosing grounds against the major foreign currencies. Already the cedi has lost its value to the dollar by about 2.64 percent since the beginning of the year.

This scary condition is also creeping into the local financial sector as capital flight scare seems to be emerging. The stock market has looked dull lately with the report that some foreign investors in the country are relocating their funds to overseas.

Similar trends are being read into the banking industry where CITY & BUSINESS GUIDE gathers that some Ghanaians are withdrawing their funds from the financial intermediaries.

Other issues relating to the kind of government policies to be implemented for the year and subsequent years as well as the scary statement of the economy being broke are the other reasons.

Donald Kaberuka, president of the African Development Bank has said that Africa's economic growth will slow further to four percent this year as demand for hard and soft commodities deteriorates.

Speaking on the sidelines of the annual meeting of the World Economic Forum, Kaberuka also said a wide range of bailout plans in developed economies meant Africa was unlikely to get the aid promised by rich countries by 2010.

Since 2005, aid had gone down by around 5 percent compared with commitments made by developed nations, he added.

The AfDB, the only multilateral development body devoted specifically to Africa, said in November that the region's economy was likely to grow no more than five percent in 2008, downgraded from the original estimate of 6.5 percent.

“Recession is too big a word for now. But I see a slowdown. We are likely to get GDP about 4 percent. Anything below 3 percent would imply the economy is growing below the demographic increase.

“Rich countries are not up to the level of their promises even before the crisis. I'm not surprised now with all the bailout problems, there will be big decline in aid to developing countries,” he explained.

By Charles Nixon Yeboah