Coronavirus: Economic toll worse than feared in 2020 - Research Economist

The toll of the coronavirus pandemic on the economy last year was worse than feared, Databank research economist Courage Kingsley Martey has said following the release of provisional GDP data by the Ghana Statistical Service (GSS) on Wednesday.

The economy grew by 0.4 percent in 2020, the data showed, below the government’s revised target of 0.9 percent and more optimistic forecasts by some market analysts. The 0.4 percent rate is the worst for the Ghanaian economy in 37 years.

Revisions to quarterly output figures showed a deeper contraction in the second and third quarters of last year than previously estimated and a not-so-strong recovery in the last quarter.

Year-on-year, real GDP growth rebounded to 3.3 percent in the fourth quarter, after contracting at 5.9 percent and 3.2 percent in the second and third quarters respectively. The economy had expanded by 6.8 percent in the first quarter, before the arrival of the pandemic in the country.

“The good news is that agriculture showed immense resilience, growing against the odds to hit its highest growth rate in four years,” said Mr. Martey, referring to a 7.4 percent expansion in agricultural output last year.

“I strongly believe that this robust performance was crucial in preventing a continuous rise in food prices after the initial lockdown-induced spike in quarter two of 2020.”

However, he added: “The bad news is that the extractive sector, the hospitality and the trade sub-sectors ended the year in a recession. This impeded growth, because these are pillars of growth in their respective sectors. And their contraction could mean a higher level of unemployment and worsened standard of living than we initially estimated.”

In addition to agriculture, the services sector also recorded a positive growth rate, with a 1.5 percent expansion. Industrial activity however contracted at 3.6 percent, led by mineral and oil production, which fell by 11 percent.

As expected, the worst effects of the pandemic affected hotels and restaurants’ output, which declined in real terms by 34.8 percent, reflecting the toll on the sector of border closures, social distancing orders and other movement restrictions that were imposed at the height of the pandemic.

On the other hand, information and communication activity increased by 22.5 percent, together with public administration activity, which expanded by 7.3 percent amid a massive injection of fiscal stimulus by the government to cushion the impact of the crisis on households and businesses.