I have noted that right after the reading of the 2017 budget statement, the NDC star man in recent times on matters of economics, Isaac Adongo, MP for the Bolga Central constituency has been doing so much talking.

I don’t doubt the honourable man’s background anyway. He has been speaking intelligently on some other issues over the last couple of months. I think I like him generally.

However, his analysis regarding projected GDP figures regarding the 2017 budget statement have left me wonder if he is not being disingenuous or on this occasion just lacks a better appreciation of the subject matter.

Now, here is it. Hon Adongo says that the GDP (provisional) for 2016 is 3.6%, and this has resulted in an out turn of GHC184 billion. Meanwhile, the NPP projected growth is 6.3%, which is expected to result in an out turn of GHC204 billion.

According to him, this result in a difference of only GHC20 billion, and having done a simple proportional analysis, Hon Adongo comes to a conclusion that something has gone amidst. In other words, if a GDP growth of 3.6% results in an outturn of GHC184 billion, then a GDP growth of 6.3% should give you much much more. This is the honourable man’s logic.

What Hon Adongo should know is that, what we are talking about here is real GDP. The difference between 6.3% and 3.6% is 2.7%. If you apply the 2.7% to the 2016 outturn of GHC184 billion, it gives GHC49 billion. Hon Adongo or anybody thinking this way wants us to add the GHC49 billion to GHC184 billion for 2016, and arrive at GHC233 billion at a projected growth rate of 6.3% for 2017.

In real GDP, you apply what we call the GDP price deflator. The GDP price deflator is the relative rate at which prices of goods and services have changed over a period (one year in our case).

The deflator factor in this case will be the rate of inflation. Now, for 2017, inflation is projected at 11.27%. Meaning, the cedi value would have reduced by that margin at least in 2017.

If you apply a deflator of 11.27% to a nominal size of GHC233 billion, you get, GHC27.26 billion. Now, if you subtract the GHC27.26 billion from GHC233 billion you get GHC205 billion. The NPP projected figure is 204 bn Ghc. Now, compare the two. Hon Adongo feels there is something wrong.  

In conclusion there is nothing amidst with the real projected GDP growth of 6.3%, at an expected inflation rate of 11.27% which is expected to result in an outturn of GHC204 billion. Hon Adongo should just make a distinction between nominal GDP and real GDP, and he will understand the figures properly.

The writer is a Senior Lecturer, Department of Management Studies Tamale Technical University & Doctoral Researcher Sheffield Business School, Sheffield Hallam University in the U. and can be contacted via email at: abudu.abdul-ganiyu@student.shu.ac.uk