Ghana’s economy is expected to return to its full potential by 2025, the World Bank revealed in its latest economic update. The report titled “Rising Prices: Unraveling the Impact of Inflation on Poverty and Food Security” said Ghana faces an extremely difficult outlook and the economic situation is expected to remain difficult before a recovery.
Economic growth is expected to slow to 1.5% in 2023 and remain low in 2024 at 2.8%. However, the Ghanaian economy is expected to regain its growth potential by 2025.
The record provides that “the aggregate of home imbalances and outside shocks in 2022 has caused macroeconomic demanding situations in Ghana. The yr turned into marked via way of means of forex depreciation, growing inflation, and tumbling investor confidence.
Pre-current financial vulnerabilities which includes mounting debt burden, a inflexible price range weakened via way of means of excessive electricity zone expenses and chronically low public revenues, had been deepened via way of means of tough worldwide monetary conditions”.
“As a end result of efforts to cope with macroeconomic instability, corrective financial and financial regulations are predicted to steer overall call for and sluggish down non-extractive GDP increase”, stated Pierre Laporte, World Bank Country Director for Ghana, Liberia, and Sierra Leone.
“High inflation, expanded hobby rates, and macroeconomic uncertainties will preserve personal intake and funding increase underneath pre-pandemic levels, main to subdued non-extractive increase in the quick term; however increase will start to get better to its capability via way of means of 2025 as drag from financial consolidation fades and macroeconomic stabilization and structural reforms begin bearing fruit.”
Government advised to embark in structural reforms
The record encouraged that further to dealing with the on the spot macroeconomic crisis, the government could be properly served via way of means of embarking on structural reforms to address its root causes, increase monetary increase, and construct monetary resilience: It called for Ghana to sustainably collect more domestic revenue, notably by streamlining tax incentive regimes and improving revenue administration.
It suggested that Ghana could implement tighter expenditure controls to improve budget execution accuracy and prevent new arrears accumulation. The report said the government needed to radically address the problems in the energy sector, which continue to threaten financial sustainability, and called on the government to expand, scale up and implement an industry stimulus package. energy comprehensively.
“Rebuilding the capital reserves of the financial sector will promote financial stability and development. According to recently published audited financial statements, the DDEP [Domestic Debt Swap Program] has eroded the capital buffers of banks and some banks are undercapitalized or insolvent. .
He called on the government to promote the flow of foreign direct investment by improving the investment environment through improving transparency, accessibility and quality of business regulation and regulatory management.
With regard to climate change resilience, the report recommends that governments build on the recommendations of the recent World Bank Country Climate and Development Report (CCDR) to prioritize investments. to maximize the benefits of resilience at a reasonable cost. “Macroeconomic shocks, especially inflation, tend to affect the poor most.
The next two years will be very difficult for Ghana’s poverty alleviation efforts. Without getting the economy back on track, there is no way to significantly reduce poverty. At the same time, safety nets designed to protect the most vulnerable must be strengthened to ensure sustainable poverty reduction and shared prosperity. Kwabena Gyan Kwakye, World Bank economist and co-author of the report.
“Expanding and strengthening support for the Livelihoods Empowerment Against Poverty Program (LEAP) can help the poorest people cope with and build resilience to future shocks,” he added.
The report also pointed out that high inflation in 2022 has significantly affected food security and poverty in Ghana, while eroding the purchasing power of Ghanaian households, leading to a decline in living standards and ultimately and poverty and food insecurity are getting worse.
