Ghana’s Economic Projections Highlight Slowdown and Fiscal Challenges

Ghana’s economic growth is projected to slow to 4% in 2025 due to reduced capital expenditures and delays in new policies, raising concerns about worsening poverty. ISSER warns of challenges in revenue mobilization and fiscal management, stressing the need for discipline and data-driven policies to improve economic conditions.

Ghana’s economic forecast indicates potential worsening poverty levels due to sluggish growth, as warned by the Institute of Statistical, Social and Economic Research (ISSER). The country expects a GDP growth rate decline from 5.7% in 2024 to 4% in 2025, which falls below the Sub-Saharan Africa average of 4.2%. Factors contributing to this downturn include decreased capital expenditure and delayed implementation of economic initiatives.

Professor Peter Quartey, ISSER Director, attributed the slower growth projection primarily to a decrease in capital investments, now estimated at only 2.5% of the GDP, along with slow advancements in the proposed 24-hour economy policy. He noted, “The 24-hour economy is a medium-to long-term measure and will take time to yield results.”

On the fiscal front, Ghana faces major challenges with a fiscal deficit of 7.9% in 2024, which surpassed its revised target of 4.2%. Revenue collection fell short, reaching only 15.9% of GDP compared to the expected 17.4%. While the debt-to-GDP ratio has dropped to 61.8% due to restructuring, Professor Quartey emphasized the need for caution, stating, “We’re inching towards the IMF’s recommended 55%, but complacency could plunge us back into crisis.”

Concerns also arise regarding government borrowing to cover budget deficits, as this may limit private sector credit access and elevate interest rates. He reiterated a critical point, “We risk repeating past mistakes if we’re not careful with borrowing and debt repayment.” This is compounded by businesses struggling to access credit due to decreased household incomes.

Regarding revenue mobilization, Professor Quartey criticized the overly ambitious target of a 45.4% increase in tax revenue for 2025, emphasizing the importance of realistic measures to achieve such goals. He cautioned, “If we fail to monitor, we’ll face shortfalls and rush back to introduce new taxes mid-year.”

He also pointed to the challenge of tax refunds, which discourage compliance if businesses do not trust they will recover their funds. The overall economic outlook is concerning, with key sectors such as agriculture and industry showing weak growth signs, which may lead to job scarcity and increased living costs for households. “The proposed 45.4% increase in income and property tax revenue could stretch household budgets further if not properly managed,” he warned.

In conclusion, Professor Quartey called for strict enforcement of fiscal responsibility laws and regular progress evaluations to prevent unexpected budgetary challenges. He urged the government to abandon ineffective policies lacking data foundations to stabilize the macroeconomic environment effectively.

In summary, Ghana faces a precarious economic situation with reduced growth forecasts and significant fiscal challenges. ISSER has highlighted the need for prudent fiscal management, realistic revenue collection targets, and sound policies that are data-driven to prevent the potential for increased poverty and economic instability. The next steps must focus on enforcing fiscal discipline to ensure sustainable growth and macroeconomic stability.

Original Source: www.myjoyonline.com