World Bank’s 1.4% GDP forecast not surprising– Economist
Economic managers must take cue and act faster- DR. Priscilla Twumasi Baffour warns.
Economist, Dr Priscilla Twumasi Baffour, is calling on managers of the economy to work harder and act swiftly by providing stimulus packages to businesses in order to facilitate the rapid economic recovery, post-covid-19.
She is however not too surprised about the modest growth forecast by the World Bank, though she describes the projection as quite small.
In myjoyonline's report, the World Bank has maintained its January 2021 prediction of a 1.4% growth rate for this year in its June 2021 Economic Prospects Report, an indication of a slowdown in economic expansion.
Dr Priscilla Twumasi Baffour who is with the Economics Department of the University of Ghana tells Joy Business this should be a wake-up call though not cast in stone.
“I think that the report is not surprising, based on the adverse effect that coronavirus has had all economies globally, but indeed the projection [GDP] is very low.
When you look at what the government of Ghana is anticipating for 2021, we’re projecting a GDP growth of 5%. So indeed this projection which comes to 1.4% is a bit on the lower side, but it’s not surprising from where we sit because the pandemic [covid-19] although has not had adverse impact in terms of health on most African countries, the economic impact has been dull because as you’re aware a lot of developing countries like Ghana depend on the export of cash crops, oil and all the others that rake in a lot of revenue for development…all these have been adversely hit because of the pandemic due to a slowdown in economic activity”, Dr Priscilla Twumasi Baffour said
“These activities are picking up with time, but it will take a long time for us to see a significant path through for the impact to be felt on the growth of the economy. But that said when you look at our Gross Domestic Product, we’re looking at agriculture, the industrial and services sector. The projection is based on the fact that the agriculture sector as expected is not too integrated in the global scheme of things, so in a way, you see that agriculture seems to be insulated from the adverse effect of the pandemic because most of our agriculture with the exception of a few cash crops, is for the domestic economy. So the impact is not that significant on agriculture”, she further said.
On the other hand, she said the industrial and services sectors are integrated into the global economy and thus anytime there are external shocks, its impacts their performances.
“These are activities [industrial and services] that are integrated in the global value chain, so if the demand is not coming from the international market, you see a slump on domestic activity. Most of our companies in the manufacturing sector import intermediate product to add value and all these activities have been negatively affected. And indeed, with the services sector, it contributes over 48% to GDP, so if the sector is hit, we expect an adverse effect on the overall GDP growth.”
“So basically, it is not a way out of expectation, but I believe that managers of the economy can take a cue from it and act faster on stimulus packages towards recovery so that we recover, and that the impact of the pandemic does not linger for a longer than expected really.”
On whether the World Bank is being cautiously optimistic about the growth rate of the country for this year, Dr Priscilla Twumasi Baffour said “I think the World Bank is being very cautious in the projection by looking at all the economic indicators. So for example, you look at our debt level, you look at the effect of inflation on growth, you see that in recent times we have come out with a number of indirect taxes that are likely to have some impact on the rate of inflation and all others. But like I said, these projections depends on what indicators the individual institution is looking at.
She however said the projection is “not cast in stone” because the actual can significantly deviate from it.
“So I will not say that the fact it [World Bank] is projecting 1.4% means a gloom for the economy but it should be an indicator for us to work harder to try to reverse all the negative impact that the pandemic has brought on the economy”, she added