'Ghana has to sustain flat curve to reset economy' - Bank of Ghana

The First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari, has said that Ghana needs to sustain a flat COVID-19 curve to create the conditions to reset the economy from the effects of the pandemic.

The pandemic disrupted the strong economic outlook for last year, as Gross Domestic Product (GDP) growth slumped to 0.4 percent in 2020—the lowest in decades—compared with the pre-COVID projection of 6.8 percent.

Speaking at the 5th Ghana CEO Summit, dubbed “Resetting Ghana’s Economy: Policy Response and Strategies for Building a Resilient Economy Post-Covid Pandemic”, Dr. Opoku-Afari said a flare-up of Covid-19 infections could potentially slow the recovery process.

The country has currently stabilised its Covid infections, after a surge in cases earlier in the year, with 1,308 active cases as at May 14.

Recommending short-term strategies to reset the economy, the First Deputy Governor said, “First, sustain the flattened Covid-curve. By this, priority must be given to health sector policies and other supportive measures including testing, tracing, and treatment. [In addition,] mass vaccination roll-outs should continue to achieve some form of herd immunity.”

He added: “The flattened curve would keep the economy open for business, provide some certainty to the economic outlook, and prevent diversion of resources to any resurgence of the pandemic.”

Last year, fiscal pressures from the health sector and the social consequences of the restricted movements disrupted the government’s fiscal projections through increased, Covid-induced expenditures.

As a result, additional expenditures related to COVID-19, coupled with revenue shortfalls on account of the economic slowdown and sharp drop in oil prices, raised the 2020 fiscal deficit to 11.7 percent of GDP, from a pre-Covid projection of 4.7 percent of GDP.

These unanticipated fiscal developments also pushed up the stock of public debt to 74.6 percent of GDP at the end of 2020 from 62.4 percent of GDP in 2019.

Dr. Opoku-Afari recommended that government maintain the Covid-19 policy responses to sustain the on-going V-shaped recovery.

“To a large extent, the COVID-19 policy responses—accommodative fiscal and monetary policies, macro-prudential measures, and other initiatives—proved timely and helped moderate what could possibly have been a worst outcome for the Ghanaian economy. Already, the implementation of these policies has spurred some recovery, evidenced by improvement in the [central] bank’s high frequency economic indicators for the first quarter of 2021.”

After the outbreak of the pandemic last year, inflation spiked from single to double digits, reaching 11.4 percent in July 2020—driven mainly by food price pressures due to the lockdown measures—before easing to 10.4 percent in December.

“Inflation has eased and declined back to single digits in April 2021, the exchange rate remains relatively stable, business and consumer confidence has bounced back, and the [central] bank’s high frequency indicators have rebounded to near pre-pandemic levels,” Dr. Opoku-Afari added.