Managers of the economy and public finances have assured that the economy will grow above the 2009 level this year, and surpass 7% next year, when oil production is set to be factored into the national accounts.
“Next year, we are implementing a growth-oriented budget. We are looking at GDP growth going beyond 7%,” Finance Minister, Dr. Kwabena Duffuor, affirmed.
In a separate chat with B&FT, Deputy Finance Minister Fiifi Kwetey averred that the economy’s growth rate in 2010 is surely set to exceed the 4.1% achieved last year; but said he “would not speculate about the target of 6.5% being reached.
“The half-year results that we have seen are bigger and better than those recorded in 2009 within the same period; so yes, the growth rate will certainly be higher than what was achieved last year,” he confirmed.
In 2009, GDP growth fell sharply from a peak of 7.3% in 2008 to 4.1%, a figure the Ghana Statistical Service has estimated based on 80% of the data needed.
This decline was a source of worry to many who warned that growth was being sacrificed in pursuit of fiscal austerity and disinflation.
But this new assessment by the Finance Minister and his deputy emphasises the Bank of Ghana’s observation in July that “the pace of economic activity may have bottomed-out and has begun showing signs of picking up, indicating an early restoration of the growth process.”
Inflation, too, fell – for the 14th consecutive month to 9.44% in August – and many businesses are hopeful the Central Bank at its Monetary Policy Committee meeting this month will further ease the policy rate, currently set at 13.5%, to nudge banks to lower the cost of credit to stimulate a better outlook in the last quarter.
However, there are fears the low inflationary trend will recede in the coming months if spending rises too strongly, especially with the holiday season in sight. The other risk stems from the maturing of wage effects on the Consumer Price Index (CPI) due to the new pay policy.
“The implementation of the Single Spine Salary Structure (SSSS) in the second half of 2010 could see a pick-up in the pace of growth in the wage bill,” the Central Back stated in its latest Fiscal Developments report.
Already, the government is said to face a funding shortfall required to fully implement the SSSS this year. According to Employment and Social Welfare Minister, Mr. E. T. Mensah, the cost of the SSSS this year is GH¢4.443 billion against a budget provision of GH¢3.113 billion, leaving a shortfall amounting to GH¢1.33 billion.
Closing this gap may require government borrowing such as could threaten achievement of the revised 2010 budget deficit target of 8%.
Dr. Duffuor, giving further insights into next year’s budget, which is under preparation, said there will be significant investments in growth-inducing areas such as agriculture, infrastructure, roads and railways, and water and sanitation.
“Government is also considering downstream investments in the oil and gas sector. We planned for them in the 2010 budget, but they have not been done because the start-date for oil production was changed from mid-year to last quarter.”
Downstream investments will comprise the development of gas infrastructure for gas gathering, processing and distribution; support for local industry to participate in value-added goods and services provision to the oil and gas sector; and petrochemical industrialisation.
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