Bank of Ghana projects six percent Growth Rate

Accra, Feb. 24, GNA - The Bank of Ghana is projecting a Gross Domestic Growth rate between five and six percent for 2009. The Ghana Statistical Service has a preliminary estimate of 6.2 percent growth for last year, which is yet to be revised.

"Developments in macroeconomic indicators point to estimates of GDP growth in the region of 6 to 7 percent for 2008," Dr Paul Acquah, Governor of the Bank of Ghana, told a news conference on Tuesday. He said the downward trend in oil prices and the current positive terms of trade could help stabilise the economy and engender growth. He said, while the terms of trade (driven by cocoa and gold prices remain relatively firm) the uncertainty about the impact and the duration of the global recession called for prudence and fiscal discipline.

Touching on the economy performance in 2008, Dr. Acquah said the provisional fiscal data for 2008 indicated that fiscal policy during the year had been expansionary. He said, although revenue outcome had been robust and mostly above budget targets, expenditures on the other hand, exceeded the budget estimates by wide margins. Total revenue and grants for 2008 amounted to GH¢5.6 billion as against a total expenditure of over GH¢8 billion (46.5 percent of GDP). Dr. Acquah said the developments resulted in a budget deficit (excluding divestiture) of GH¢2.5 billion (14.9 percent of GDP) in 2008. "Including divestiture, the overall deficit amounted to GH¢1.97 billion (11.5 percent of GDP), up from 8.1 percent of GDP for 2007, and 7.7 percent for 2006," he said.

Wages and salaries took a large chunk amounting to GH¢1.9 billion (11.5 percent of GDP). Excess wages and salaries over the budget estimate amounted to GH¢427.8 million (2.5 percent of GDP), and transfers to purchase crude oil to power the thermal plant amounted to GH¢397.5 million (2.3 percent of GDP). Other items were Sovereign bond financed expenditure of GH¢581.9 million (3.4 percent of GDP) mainly to cover investment in energy. Donor financed capital expenditure amounted to GH¢906.5 million (5.3 percent of GDP). Total capital expenditure for 2008 was 11.7 percent (an annual average of 10.0 percent).

Dr. Acquah said the deficit was financed by a drawdown of sovereign bond deposits with the Bank of Ghana, together with an estimated GH¢1.1 billion of domestic borrowing equivalent to 14.3 percent of money stock. The stock of domestic debt (gross) stood at GH¢4.7 billion (27.8 percent of GDP) at the end of 2008, up from GH¢3.7 billion (26.5 percent of GDP) in 2007. The country's External Debt stood at US$3.98 billion (28.1 percent of GDP) at the end 2008, up from US$3.5 billion (24.9 percent of GDP) in 2007. "This brings total public debt to the equivalent of US$7.9 billion (55.9 percent of GDP), up from US$7.4 billion (51.4 percent of GDP) in 2007." Dr. Acquah said the Bank of Ghana was closely monitoring the shifts in terms of trade and continuous re-alignments of currencies in the international markets and its impact on the Ghanaian economy.

At the moment, Ghana is on the positive side of the terms of trade shift as crude oil prices continue to fall and gold and cocoa prices continue to hold relatively firm, he said. Dr Acquah said available trade statistics at the end of 2008 reflected the strong pace in economic activity during the year. Total merchandise export closed the year at US$5.27 billion compare with US$4.17 billion in 2007.

Exports of cocoa beans and products recorded an annual growth of 32.6 percent, and amounted to US$1.50 billion in 2008. Gold export amounted US$2.24 billion at the end of December 2008 compared with US$1.67 billion at the end of December 2007. Similarly, non-traditional exports were US$949.2 million at the end of 2008, compared with US$836.8 million for 2007.

The top 5 key non-traditional exports account for about 76.0 percent of total non-traditional exports. The top five in 2008 were Prepared or Preserved Tuna (22.8 percent), Lubricating Oils (21 percent), Cocoa Paste (12.9 percent), Perfumery and Cosmetic Preparations (10.2 percent) and Shea Nuts (9.0 percent). Total merchandise import increased by 23.6 percent to US$10,260.9 million at the end of December 2008. This compares with corresponding levels US$8,066.1 million respectively for 2007. Total oil import bill stood at US$2.34 billion due to surge in crude oil prices. This compares with corresponding amounts of US$846.6 million, US$1,523.9 million in the second and third quarters and a full year bill of US$2,095.0 million for 2007. Non-oil imports also increased to US$7.9 billion at the end of December 2008. The corresponding level was US$5.9 billion in 2007, and represents an annual growth of 32.5 percent.

The above developments translated into a merchandise trade deficit provisionally estimated at US$4.98 billion at the end of December 2008. This compares with a deficit of US$3,893.9 million for 2007. Similarly, the current account deficit was estimated at US$3,473.5 million at the end of December 2008. This compares with US$2,151.5 million for 2007. Dr Acquah said the overall balance of payments recorded a deficit of US$940.7 million at the end of December 2008, reversing a surplus of US$413.1 million in 2007. Gross international reserves position at the end of December 2008 stood at US$2.03 billion, representing 1.8 months of imports of goods and services. Remittances through the banks for the year amounted to US$8.7 billion, which represents 26.8 percent increase over those for 2007. Of the total transfers for 2008, US$1.67 billion (or 19.2 percent) accrued to individuals, compared with US$1.66 billion (24.1 percent) in 2007.