Business News of Wednesday, 24 December 2014
Government is set to miss most of its macroeconomic targets for 2014 to cap a year that has seen the country’s currency – the cedi — depreciate greatly against all the major trading currencies.
The only macroeconomic target government is on course to achieve this year is gross international reserves of not less than three months import cover for goods and services.
The Finance Minister Seth Tekper reviewed downward most of government’s targets when he presented the mid-year budget review to parliament in July, but provisional figures and trend analysis show that all but one of the revised targets will also be missed.
Already, the Ghana Statistical Service (GSS) has cut GDP growth rate for this year by 0.2 percent based on provisional data gathered. According to the GSS, which in October released its provisional GDP based on available information as at the end of June 2014, the economy is estimated to expand by 6.9 percent — down from a revised target of 7.1 percent and the 2013 growth of 7.6 percent.
The projected GDP growth of 6.9 percent by the Statistical Service, it is feared, could also be missed as the international price of oil — which is expected to contribute 0.5 percent to the country’s overall economic growth — is currently witnessing a downward spiral.
At the same time, energy disruptions have forced many companies to cut production output; putting pressure on the already weakening growth momentum.
To make matters worse, growth and investment have remained low and an absence of new job opportunities has meant more and more young educated people are out of work.
Prices on the other hand continue to rise, with November inflation increasing to 17 percent to put government’s end of year inflation target of at most 15 percent out of reach; especially as the Christmas season — a period associated with high spending — is expected to boost spending and pile pressure on consumer pockets.
Indeed, the central bank in its inflation outlook report in November warned that government’s inflation target would not be actualises as fiscal vulnerabilities, exchange rate pressures, and inflation expectations pose significant risks to inflation.
On the fiscal side revenue shortfalls, overruns in the wage bill, and rising interest costs are expected to push this year’s deficit beyond the target of 8.8 percent of GDP. As of now, government’s budget deficit is hovering around 9.8 percent.
Data available indicate that between January and September this year government failed to meet its revenue targets, as revenue and grants realised was GH¢17.7billion — falling short of the GH¢18.4 billion target.
Boosting government’s revenue target now is even more untenable, as world market prices of Ghana’s major export commodities have tumbled. While the world market price of oil has dropped from US$115 in July to US$61 a barrel as of Monday, the price of gold — which is Ghana’s biggest export earner — has also declined from an average of US$1,238 per ounce in July to US$1,050. There’s also a slowdown in economic activities and imports.
Meanwhile, government is in line to meet the set target for gross international reserves of not less than three months of import cover for goods and services. As of the first week of November, the gross international reserves have improved to US$6.6billion: equivalent to 3.8 months of import cover.
The missed targets signify a lot of work for government to consolidate its fiscal position and achieve the economic transformation Ghanaians cravea.
Mr. Tekper presented the 2015 budget on the theme “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy ’’, and as Christina Daseking — the IMF’s team lead — remarked earlier in the year in the Fund’s assessment of the Ghanaian economy: “The success of the government’s ambitious transformation agenda is contingent on restoring macroeconomic stability”.