Post-coronavirus: Key sectors need support to boost recovery - Economist

A Senior Economist with investment banking firm Databank, Courage Martey says deliberate policy measures are needed to support critical sectors of the economy to support the economic recovery efforts following the effect of the pandemic.

He was speaking to the Business24 after the Ghana Statistical Service (GSS) announced that the economy contracted by 1.1 percent in the third quarter of this year. The contraction is a stark contrast to the 5.6 percent recorded within same period last year.

The third-quarter contraction follows a 3.2 percent contraction in the second quarter.

According to the GDP data released on Wednesday, despite the slump, the agriculture sector recorded a remarkable growth of 8.3 percent while the Industry and Services sectors contracted, -5.1 and -1.1 percent, respectively.

“Using agriculture as a case study, we see the 8.3 percent growth reflects the harvest season which was largely supported by policy interventions to boost domestic output in the light of disruptions to global supply chains. We need to continue these kinds of targeted interventions to sustain the recovery,” Mr. Martey said in an interview with Business24.

He described the growth as disappointing given the steady growth in the Real Composite Index Of Economic Activity (CIEA), which indicated a recovery in the index growth from -10.5 percent in April-2020 [during the lockdown] to +10.5 in Sep-2020 [post-lockdown].

“…also, a post-lockdown survey by the government showed that 95 percent of businesses were optimistic about recovery on account of the continued FX stability and improving economic activity. Against this backdrop, we expected that we creep into positive real GDP growth as quickly as the third quarter of 2020,” the Senior Economist said.

With the economy still in the woods following a quarter-on-quarter contraction, Mr. Martey was doubtful government’s growth target of 1.9 percent for 2020 could be realised.

The Senior Economist noted that the trade sub-sector, a major pillar within the services sector, showed a quarter-on-quarter expansion, reflecting the gradual reopening and improvements in economic activity.

“The data revealed that the perceived improvements are real because the level of contractions recorded in the third quarter was smaller than the contractions earlier recorded in the second quarter. So the recovery is taking place steadily but still fragile at the moment,” he added.

Commenting on the latest GDP data, Emmanuel Ashley, Chartered Economist said the reasons for the significant improvement in the performance of the agriculture sector and relatively poor performance of the respective industrial and services sectors are not far-fetched as the impact of COVID-19 on rural communities has been minimal during the period.