Economists: Higher GDP growth possible, but not certain, as normality returns

It is possible, say economists, but not certain, that Ghana’s economic growth for 2020 would beat the official projection of 0.9 percent, following the further relaxation of restrictions which were imposed to curb the COVID-19 pandemic in the country.

Courage Martey, an economist with investment banking firm Databank, told Business24 in an interview that economic activity, though increasing, is yet to reach optimal levels that will alter the growth projection.

The August reading of the Ghana Purchasing Managers Index (PMI), a key measure of the pulse of economic activity, recorded its first expansion since February and the third successive month of increased new orders and output.

Mr. Martey said though the increase in economic activity – as confirmed by the PMI and an update from JP Morgan, the investment bank – is encouraging, it does not necessarily mean the economy will outperform the growth forecast.

“The improvements we see are still a great deal below optimum levels, which requires some level of caution. An important factor to also note is that business and consumer confidence is steadily firming up since the gradual easing of restrictions but remains fragile, reflected in the below 100 points reading by the BoG,” he stated.

In his view, beating the 0.9 percent growth target is dependent on factors such as a revival of global supply chains.

“The disruptions to global supply chains have not completely returned to normal levels. This means that while production is steadily returning, delivery on orders remains less efficient and hampered.

This means that there’s only a limit that stockpiling can go if deliveries to market do not improve significantly. This situation could also cap the impact on overall GDP growth for the year,” he argued.

Positive outcome

Mr. Martey however added that despite the factors that still constrain economic growth, there is the possibility that an elections-related boost to aggregate demand could provide an upside push to overall growth and support the possibility of outperforming the 0.9 percent overall GDP growth forecast.

Dr. Said Boakye, a Senior Research Fellow at the Institute for Fiscal Studies, a fiscal policy think tank, also told Business24 in an interview that government was too cautious in its growth projection, given that the lockdown introduced earlier in the year lasted for barely a month.

He argued that with the increase in economic activity following the easing of most of the restrictions, the projected growth for this year is likely to be surpassed.

“I think that the country may register some positive growth. I have said, about a month ago, that any growth between 1-5 percent will not be surprising. The growth target announced by the Minister [of Finance], to me, was too conservative. With the opening of the airport, I think the country should be able to do better than 0.9 percent growth,” Dr. Boakye said.