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11.08.2005 Business & Finance

5.8% GDP growth is unattainable this year - Budget Review


Accra, Aug. 11, GNA - Government's targeted 5.8 per cent real Gross Domestic Product (GDP) growth rate for this year is unlikely to be achieved, a mid-year budget review by the Department of Economics, University of Ghana has indicated.

The review cited the performances of the Cocoa Sector that had been the driving force in real sector growth and the food crop sector, which it said fell below expectation compared to the 2004 figures. Presenting the study on Thursday at a roundtable organised by the Private Enterprise Foundation (PEF), Mr Emmanuel Cudjoe of the Economic Department of the University of Ghana, said indications were that cocoa production for this year would be 550,000 tonnes compared to 700,000 tonnes produced last year.

"This represent a short fall of 150,000 tonnes against the projection of a 13 per cent increase over 2004 output," Mr Cudjoe observed.

The story, according to him was not different for the food and crop production quoting the Ministry of Food and Agriculture information, which indicated an aggregate food shortage of 400,000 tonnes this year due to irregular rainfall pattern in Southern Ghana. On the overall economy performance, Mr Cudjoe said the Government's macro economic targets were significantly attained which have led to relative stable economic environment with low inflation rates, lower policy interest rates, relative stable currency and strong external reserves.

He said a question that needed to be addressed was how the private sector was bracing itself to respond to these favourable conditions adding: "These achievements are not mere statistics, but changes that could lead to fundamental transformation of the economy and in the lives of the citizenry."

Mr Cudjoe noted that the period under review, domestic tax revenue growth was strong amounting to 8,045 billion cedis and was 20 per cent of GDP when annualised, and it represented a 25.7 per cent increase over what was realised for the same period in 2004.

He said the overall Central Government budget recorded a deficit of 1,512.5 billion cedis, which was about 1.56 per cent of GDP exceeding the programmed deficit of 772.1 billion cedis.

The domestic primary balance, however, recorded a surplus of 1,293.3 billion cedis representing 1.34 per cent of GDP. The budget target for period was 1,348.8 billion cedis equivalent of 1.40 per cent of GDP.

Mr Cudjoe said caution should be taken in order not to oversimplify access to credit and noted that there were reliable and useful procedures and conditions to be observed in the credit market. For the way forward, he said the private sector's expectation of the 2006 budget would be to see a budget that would give more hope, remove obstacles in industrial activities and focus on processes for production. Mr Cudjoe urged the private sector to show more commitment in its entire role as the engine of growth saying: "The budget will supply the oil for the engine." 11 Aug 05