Q3 GDP to signal recovery - Economist

The Ghana Statistical Service (GSS) will today release data on the economy’s third-quarter performance, which is expected to signal the much-needed post-COVID-19 recovery.

The economy struggled under the weight of the pandemic in the first six months of the year, with the GSS reporting a 3.2 percent contraction of GDP in the second quarter.

According to Courage Martey, a senior economist with investment banking firm Databank, the economy is set to respond positively to the easing of government-imposed restrictions to curb the spread of the virus.

“I expect the Q3 GDP data to signal the start of the medium-term journey to the post-COVID recovery. In other words, I expect the overall growth number to switch from the negative 3.2 percent recorded in the second quarter to a modest positive growth in Q3-2020.

The early and gradual reopening of the economy, in addition to the elections-driven push in public infrastructure spending, is being reflected in high frequency data as captured by the Bank of Ghana’s Composite Index of Economic Activity (CIEA),” he said.

The CIEA data released by the central bank during its last monetary policy meeting revealed a 10.5 percent expansion in September, compared with 4.2 percent growth a year ago.

The key drivers of economic activity during the period were construction activities, manufacturing, and credit to the private sector.

Mr. Martey said these real sector indicators suggest that economic activity is picking up steadily and should translate into a quick return to the path of positive growth.

“However, I think the growth momentum would still be feeble and require continued fiscal and monetary support to hit potential growth rates. Against this backdrop, I won’t be surprised to see growth rates anywhere between 1.5 percent to 2.5 percent in Q3-2020,” he predicted.

Another economist, Dr. Theo Acheampong, also expressed the confidence that growth in the third quarter will be positively impacted by the easing of restrictions since the second quarter of this year.

“I expect activity levels to have picked up significantly in Q3 following the easing of restrictions. The GSS Covid-19 business tracker showed some improvement in activity levels,” he told Business24.

Q2 slump

The biggest slump in the second quarter GDP data occurred in the hospitality sub-sector, which fell by more than 79 percent. This was followed by the trade, repair of vehicles, and household goods sub-sector, which contracted by 20.2 percent.

Despite the overall contraction in GDP growth, Mr. Martey explained that government’s decision to ease restrictions earlier, compared to most African countries, may have prevented further damage.

Government has projected a growth target of under 2 percent for 2020, and a favourable third-quarter performance would steer the economy further away from contraction and begin the post-Covid-19 path to economic growth.