The review covers the real sector, fiscal developments, money and prices, and the external sector.
Presenting the report in Accra last Tuesday, a Senior Fellow at the IEA, Dr John Kwakye, indicated that the outlook for the economy in the second-half of the year was clouded with uncertainties associated with a new International Monetary Fund (IMF)-sponsored programme and commodity price prospects.
He said strong fiscal consolidation would be critical in bringing about the much-needed macroeconomic stability.
Dr Kwakye said that in the long-term, the government needed to transform the economy by diversifying and adding value to exports through industrialisation to produce a significant part of current imports at home.
That, he said, would be necessary to address the structural,financial and economic imbalances and for sustained growth.
Receipt, expenditure and debt
The report indicated that during the first half of 2015, the government’s total receipts amounted to GH¢14,9832.2 million (11 per cent of GDP).
Total expenditure was GH¢17,3367.7 million (12.9 per cent of GDP), while recurrent expenditure was disproportionally high compared to capital expenditure, which the report said was an “undesirable feature for the budget.”
It urgently called for a rebalancing of expenditure to foster economic growth.
The report stated that as of the end of June, 2015, total public debt stood at GH¢94.5 billion or 70.9 per cent of GDP, and indicated that over the six-month period, the debt increased by GH¢15.5 billion.
The report noted that there was concern that Ghana could return to the Heavily Indebted Poor Countries (HIPC) situation if borrowing continued at the current pace.
It stated that the way to avoid the risk of returning to the HIPC situation was to adhere strictly to the fiscal consolidation envisaged under the IMF-supported programme, and indicated that any departure from that path would have disastrous consequences.
As warned by the IMF, it indicated that the 2016 elections posed the greatest risk, given the political cycle of expenditure overruns.
The report said during the period under review, inflation remained high between 16.4 per cent in January and 17.1 per cent in June.
It said the high rate of inflation was fuelled by exchange rate depreciation and previous increases in fuel and utility prices.
The report said subdued international oil prices, if sustained, and the expected effects of fiscal consolidation and stability in exchange rate as a result of new foreign inflows could help dampen inflation pressures in the second-half of the year.
The report indicated that the Bank of Ghana (BoG) increased its policy rate by 100 basis points from 21 per cent to 22 per cent as it sought to counter both inflation and exchange rate depreciation.
For his part, a senior lecturer at the Economics Department of the University of Ghana, Legon, Dr Eric Osei-Assibey, who moderated the function, said Ghana’s economy was under severe challenge.
He noted that the government was trying to consolidate the economy, and tasked the government to also work towards growing the economy “so that your people do not go hungry.”