Economic Think-Tank Commends Government On State Of Economy

Accra, Ghana (PANA) - The Institute of Statistical, Social and Economic Research of the University of Ghana, Legon, has commended the government for the tremendous improvement in the national economic management as evidenced in the various macro-economic indicators.

It, however, noted that the economy could have done better if it were not for some external shocks experienced in 1998.

The institute, an independent statistical research institution which carries out activities that promote socio-economic development in the country, was launching the 1998 State of the Ghanaian Economy Report in Accra Thursday.

Kwadwo Asenso-Okyere, the director of the institute, said with a GDP growth rate of 4.6 percent, it was "heart warming" to find end-of-year inflation at 15.7 percent, from 70.8 at the end of 1995 and 20.8 at the beginning of 1998.

Inflation, according to the Ghana Statistical Service, was 9.4 percent at end of May.

Asenso-Okyere commended the reduction in inflation which, he said, had been spurred on by the moderate growth in money supply of 17.3 percent as against 39.5 percent in 1997.

He said the local currency, the cedi, was stable in 1998 with a relative depreciation of just 4.2 percent in the interbank market and 3.9 percent at the forex market, using end-period rates.

The report said interest rates have been sticky over the years even though inflation has fallen consistently.

"For instance, the rediscount rate remained at 45 percent from December 1995 to August 1998 before coming down to 37 in November," it explained.

Looking at the fiscal performance of the economy in 1998, Asenso-Okyere said, using the broad format, the overall budget deficit was about 6.3 percent of GDP as compared with a projection of 7.9 percent of GDP and 8.6 percent of GDP in 1997.

The low budget deficit resulted from better expenditure monitoring and control in 1998 than in previous years.

The report noted that as compared to the 1997 figures, revenue rose by 29.9 percent without divestiture receipts and 35.7 percent with divestiture receipts. Total revenue as a proportion of GDP increased from 18.4 percent in 1997 to 19.9 percent in 1998.

Asenso-Okyere said government expenditure on salaries and wages continue to decline as a proportion of recurrent expenditure, adding that from 90 percent in the 1980's, the proportion had gone down to 33.5 percent in 1998.

Food production was the highest, 5.3 percent, since the economic reforms began in 1983.

Giving the outlook for 1999, Asenso-Okyere said care must be taken not to run the country into a recession, adding that other indicators like unemployment must be watched closely.

He said with low food prices, prospects for a single digit inflation during the year are bright.

"One area that needs more attention is government expenditure...in relation to current revenue levels, government expenditure has not fallen as much as it should and further restraints are necessary to reduce the budget deficit as a proportion of the GDP to help keep inflation down," he advised.