Given that Ghana is an import-driven economy, COVID-19 is likely to have a significant adverse impact on the country’s international trade and reserves, accounting professionals Deloitte have said.
“If the Covid-19 situation persists longer than anticipated, the economy could suffer from significant decline in Government revenue and expenditure resulting in potential job losses. This could in turn erode the economic gains achieved in recent years and significantly slow down Ghana’s economic development”, Deloitte said in its Economic Impact Analysis of the COVID-19 Pandemic on the Ghanaian Economy.
In the light of current developments, the government estimates a slump in projected GDP growth for 2020 at 2.6%, which is significantly lower than budgeted GDP growth of 6.8% for the year.
Also, the additional borrowing and related expenses that will be incurred are likely to increase the country’s debt risk.
Deloitte explained that the unplanned increase in expenditure, particularly in the health sector, could adversely impact the fiscal deficit.
The government estimates that events unfolding as a result of COVID-19, even with some mitigating measures, will result in a deficit of 6.6% of revised GDP, which is higher than the de facto fiscal rule of 5% established by the Fiscal Responsibility Law.
Continuing, Deloitte said: “Beyond the inevitable impact of the global COVID-19 disruptions on Ghana, the government’s response to the outbreak, key amongst which include closure of all borders and partial lockdown of selected areas, is already having a toll on the economy.”
In Ghana, the economic impact of COVID-19 includes the adverse impact on the hospitality industry due to the closure of borders and general slowdown in tourism and demand for international travel.
Others are a decline in trading volumes and values due to disruptions in supply chain globally, contraction in Foreign Direct Investment (FDI) flows to Ghana due to uncertainties and the adverse impact on the agriculture value chain due to disruptions in the global supply chain and slowdown in demand as countries adjust mixed impact of COVID-19 on commodity prices.
Deloitte said government’s response to the virus was largely informed by lessons learnt from countries earlier hit by the virus, especially in Asia and Europe.
Given that countries such as Italy, Spain and USA have been reported to be severely impacted by the outbreak due to their initial slow response to the outbreak, the government of Ghana has been widely commended for its response to the outbreak, although there are sections of the public that have suggested that some of these responses could have been initiated earlier.
Key amongst the actions taken by the government are closure of all borders, mandatory quarantine and testing of incoming travelers and more recently, partial lockdown of selected areas identified as hot spots.
“If lessons from countries like China and South Korea are anything to go by, one can expect the government’s response to yield some results and flatten the curve in the coming weeks, an achievement largely credited to lockdowns and other viral containment measures implemented in these jurisdictions”, it concluded.