State of Economy Report launched

Accra, Sept. 10, GNA - The Institute of Statistical Social and Economic Research (ISSER) on Monday commended the country's positive economic drive but expressed fears that huge government expenditures might make attainment of some of the targets of the 2007 budget difficult.

Government's policy objectives for 2007 include better revenue mobilization, containing the fiscal deficit and inflation and reducing the overall budget deficit from 7.6 per cent to 3.2 per cent of Gross Domestic Product (GDP).

Speaking at the Launch of State of the Ghanaian Economy Report 2006, Professor Ernest Aryeetey, Director of ISSER, said the huge government expenditure was not being matched with increases in revenue generation. For instance, the fiscal deterioration in 2006 was due to a big jump in government spending from 20.6 per cent of GDP in 2005 to 25.9 per cent of GDP at a time domestic revenue fell from 24 per cent of GDP to 22.3 per cent during the same period.

The Report spans the agriculture, industry and services sectors of the economy. It also examined fiscal developments, Monetary and Financial developments, international trade and payments last year. Professor Aryeetey expressed concern that despite those huge expenditure, just less than one per cent of GDP (0.9) per cent was spent on the administration of Districts Assemblies.

He said the development did not augur well for the country's decentralization programme and also had implications for the fight against poverty across the country.

Prof Aryeetey said as a small vulnerable economy, which was opened to external shocks, it was important to develop a system to predict correctly the expenditure pattern over a period of time.

Besides, government should have a way of dealing with unexpected demand for increased emoluments from public sector workers. He lauded the consistent GDP growth performance over the seven years period, saying the private sector had responded positively to various policy reforms such as tax incentives through increased investment. Despite the improvements and policy changes, Professor Aryeetey said, it was important that the country free itself from the stranglehold of the big external influence on its economy. Touching on the emergence of China and India, Prof Aryeetey said the two countries presented huge market opportunities that Ghana needed to tap into.

To do this effectively, however, Ghana must position itself well to enjoy the benefits that would accrue from the relationship with China. In addition, the country must examine the impact on the environment and the implications for the development of domestic market as she struggled to meet resource demands of China. On poverty, Prof. Aryeetey said although poverty was declining across the country, there was the need for shared growth to reduce the dichotomy between levels in Northern and Southern Ghana. This, he said, called for deliberate government policies to invest in productive ventures in the northern regions that collectively benefited the people.

On the 2007 half year performance, Dr Felix Asante, Head Economics Division of ISSER, said it was unlikely that crude oil prices would fall below 65 dollars per barrel by the end of the year. Crude oil imports by the close of June this year amounted to 924.10 million dollars compared to 827.98 million dollars for the same period last year. 10 Sept. 07