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Research institute doubts Ghana can meet 4.5-pct growth target

Xinhua, September 28, 2016 Adjust font size:

A Ghanaian research institute said Tuesday it doubted Ghana's ability to achieve the 4.5-percent growth target for the year.

In its "State of the Ghanaian Economy-2015" report, the Institute of Statistical, Social and Economic Research (ISSER), based in the University of Ghana, said some of the assumptions that informed the projected growth might not pan out.

The International Monetary Fund (IMF) had projected that, with the stabilization of the energy situation and restoration of power supply, the West African cocoa, gold and oil exporter could record an economic growth of about 4.5 percent.

"It is likely this will not be achieved because if you solve the challenge in energy sector, the businesses that collapsed during the power crisis won't be able to come back immediately," argued Professor Felix Asante, Director of ISSER, who presented the findings.

"Structural limitations in infrastructure and labor markets along with declining commodity prices will contribute to a slow-down in growth momentum," the report said.

Despite appreciable progress made in certain areas, the report said macroeconomic management remains a challenge for the country, which could also hamper economic growth, with inflation rate at a level that doubles the Sub-Sahara Africa (SSA) average.

Interest rates in Ghana remain above 30 percent and ISSER argues this would discourage borrowing and productive investment.

"This calls for a serious prioritization of public finances, which requires considerable political discipline," the report noted.

On the projected reduction in fiscal deficit to 3 percent from the current above 6 percent, the report said three key risks exist which could compromise the attainment of this objective.

"Debt strategy of increasing borrowing on private capital market while the challenge of spending efficiency lingers may be counter-productive."

"Increasing levels of taxes as well as the energy challenges the country has faced may compromise the growth target for 2016," it suggested.

The major fear expressed by the report is the election year spending which can reverse all the gains made so far on fiscal discipline.

In his remarks, Professor Ebenezer Oduro Owusu, Vice-Chancellor(President) of the University of Ghana, Legon, said the exploitation of oil and other natural resources must not be a reason to abandon the agriculture sector, which has been the traditional backbone of the economy.

The research institute publishes the "State of the Economy" report annually to analyze growth in all sectors of the economy in the previous year and make projections for the current one. Endit