Ghana’s economy is expected to recover its potential by 2025, a World Bank report has disclosed.
According to the World Bank, the situation is the result of a combination of domestic imbalances and external shocks in 2022, which caused Ghana to face macroeconomic challenges.
The World Bank said the year was marked by currency depreciation, rising inflation, and tumbling investor confidence.
Pre-existing fiscal vulnerabilities such as mounting debt burden, a rigid budget weakened by high energy sector costs and chronically low public revenues, were deepened by difficult global economic conditions notes the World Bank’s latest Economic Update.
The report titled “Price Surge: Unraveling Inflation’s Toll on Poverty and Food Security” states that Ghana faces an extremely challenging outlook, and the economic situation is likely to remain challenging before it rebounds.
Economic growth is projected to slow down to 1.5% in 2023 and remain depressed in 2024 at 2.8% but the economy is expected to recover to its potential growth by 2025.
“As a result of efforts to address macroeconomic instability, corrective fiscal and monetary policies are expected to influence total demand and slow down non-extractive GDP growth”, said Pierre Laporte, World Bank Country Director for Ghana, Liberia, and Sierra Leone “High inflation, increased interest rates, and macroeconomic uncertainties will keep private consumption and investment growth below pre-pandemic levels, leading to subdued non-extractive growth in the short term; but growth will begin to recover to its potential by 2025 as drag from fiscal consolidation fades and macroeconomic stabilization and structural reforms start bearing fruit.”
It recommends that in addition to managing the immediate macroeconomic crisis, the authorities would be well served by embarking on structural reforms to tackle its root causes, boost economic growth, and build economic resilience:
It further asked Ghana to sustainably collect more domestic revenue, notably by streamlining tax incentive regimes and improving revenue administration.
It suggests that Ghana could implement tighter expenditure controls to improve budget execution accuracy and prevent new arrears accumulation.
The report states that the government needs to fully address the energy sector shortfalls, which continue to threaten fiscal sustainability, and it calls on the government to extend, expand, and thoroughly implement the Energy Sector Recovery Programme.
Rebuilding the financial sector’s capital buffers, will promote financial stability and development. As based on recently published audited financial statements, the DDEP has eroded banks’ capital buffers and some banks are undercapitalized or insolvent.
It calls on the government to boost the inflow of FDI by enhancing the investment climate through improvements in transparency, accessibility and quality of business regulation and regulatory governance.
By: Rainbowradioonline.com/Ghana
