Accra,
Nov. 11,
Ghanadot/GNA
- The
Institute
of
Economic
Affairs
(IEA) on
Tuesday
stated
that
real
Gross
Domestic
Product
(GDP)
for 2007
fiscal
year
dropped
to 6.2
per cent
from the
6.4 per
cent
recorded
in 2006.
"The 6.2
per cent
economic
growth
rate
recorded
for 2007
was also
slightly
below
the
government's
target
of 6.5
per cent
documented
in the
government
budget
statement
for
2007,"
IEA
stated
in its
annual
2007
Economic
Review
and
Outlook
documents
made
available
to the
Ghana
News
Agency
in
Accra.
The
Economic
Review
presents
an
overview
of the
performance
of the
economy
of Ghana
during
the
calendar
year
2007 and
outlook
for 2008
and
beyond
based on
provisional
data
released
by the
Ghana
Statistical
Service.
The IEA
report
attributed
the
economic
decline
to a
combination
of
factors,
which
included
the
nation-wide
electricity
energy
rationing
that
ended at
the end
of
September
2007 and
increases
in the
world
market
prices
of crude
oil.
The IEA
2007
Economic
Review
and
Outlook
Survey
was
conducted
by a
team of
economist
including,
Dr
Kwabena
Asomanin
Anaman,
IEA Head
of
Economic
Centre
and
Director
of
Research;
Professor
Alhassan
Wayo
Seini,
IEA
Senior
Fellow;
Prof
John
Asafu-Adjaye,
IEA
Senior
Fellow
and Mrs.
Charity
Osei-Amponsah,
IEA
Research
Assistant.
The rest
are Dr.
Daniel
Bruce
Sarpong,
Senior
Lecturer
and
Head,
Department
of
Agricultural
Economics
and
Agribusiness,
University
of
Ghana;
Dr. Kofi
Marfo
Mrs
Abigail
Abandah-Sam;
Mr
Matthew
Armah
and Mr
Martin
Esan
Benjamin,
all
Seniors
Executive
Officers
of
Millennium
Development
Authority
(MiDA),
Accra.
The
Report
said the
6.2 per
cent
marginal
growth
in 2007
was
largely
achieved
on the
back of
the
services
sector,
the
construction
and
mining
industries.
The
provisional
fiscal
outturn
in 2007
showed
that the
total
government
expenditure
was
5,701.5
million
Ghana
cedis as
compared
to total
revenue
of
4,508.2
million
Ghana
cedis.
The
government
budget
deficit
for 2007
was
1,193.3
million
Ghana
cedis,
which
was
about
8.5 per
cent of
the GDP
based on
commitments.
The
overall
budget
deficit
for 2007
including
divestiture
sales of
government
assets
was
1,132.2
million
Ghana
cedis
equivalent
to 8.1
per cent
of GDP.
The IEA
Economic
Review
Document
said the
deficit
was
higher
than the
7.8 per
cent
recorded
in 2006.
The
deficit
figure
for 2007
was just
over
two-and-a-
half
times
the
target
budget
deficit
of 3.2
per cent
contained
in the
2007
government
budget
statement.
The
domestic
primary
balance
deficit
was 6.7
per cent
of GDP
and this
was
substantially
higher
than the
target
0.6 per
cent of
GDP set
by the
government.
Total
government
domestic
revenue
as a
proportion
of GDP
increased
from
22.3 per
cent in
2006 to
25.8 per
cent in
2007,
which
was the
highest
since
2002.
The
total
revenue
and
grants
as a
share of
GDP also
increased
from
27.8 per
cent of
GDP in
2006 to
31.8 per
cent of
GDP in
2007.
The
total
size of
grants
in 2007
was
857.2
million
Ghana
cedis,
representing
about 19
per cent
of the
total
revenue.
In
general,
fiscal
management
deteriorated
considerably
during
the
2006-2007
period.
The
economic
growth
over the
two-year
period
(averaging
6.3 per
cent)
was
generated
partly
due to
excessive
fiscal
deficits.
According
to IEA
the
government
deficits
over the
last two
years
(2006
and
2007)
and the
high
deficit
for the
first
six
months
of 2008
raise
concerns
about
the
sustainability
of
financing
government
projects.
On the
Agricultural
Sector,
the IEA
Economic
Review
document
noted
that
growth
in the
industry
was far
below
the
target
while
there
was a
decline
in the
growth
of the
manufacturing
industry
continuing
the
trend
over the
last
decade
of
shrinkage
of the
manufacturing
industry
during a
period
of
continuous
economic
growth.
In 2007,
the
agriculture
sector
grew at
a rate
of 3.1
per cent
lower
than the
revised
growth
rate of
4.5 per
cent
achieved
by this
sector
in 2006.
The
growth
rate of
the
agriculture
sector
was also
significantly
below
the
government's
target
of 6.1
per cent
contained
in the
government
2007
budget
statement.
Contrary
to the
IEA
figures,
the
ruling
New
Patriotic
Party (NPP)
in its
Election
2008
manifesto
dubbed:
"Moving
Ghana
Forward;
Building
a Modern
Ghana,"
said the
sector
has
recorded
massive
and real
growth.
The NPP
figures
indicate
that the
agricultural
sector's
growth
rate
increased
from 2.1
per cent
in 2000
to 4.4
per cent
in 2002
and 6.5
per cent
in 2006.
The IEA
Economic
Review
document
also
recorded
decline
in the
industrial
sector,
recording
6.6 per
cent
from the
9.5 per
cent
recorded
in 2006.
The
services
sector,
however,
grew at
an
annual
rate of
10.0 per
cent
recorded
in 2007,
much
higher
than the
6.7 per
cent
recorded
in 2006.
In 2007,
the
services
sector
became
the
largest
sector
of the
economy
outstripping
the
agriculture
sector
of its
dominant
role.
The
relatively
weaker
performance
of the
agriculture
and
industrial
sectors
(especially
the
continuously
shrinking
manufacturing
industry)
is of
some
concern
as it
indicates
lower
ability
of the
country
to
produce
essential
goods
and
commodities
in the
agriculture
and
industrial
sectors
for
consumption
and the
sustainable
development
of the
country,
the IEA
report
states.
Under
monetary
developments,
the IEA
Economic
Review
analysis
confirmed
that
money
supply
growth
was the
major
driver
of the
inflation
in the
Ghanaian
economy.
The
broad
money
supply,
which is
the
total
liquidity
in the
economy,
grew
sluggishly
at an
average
monthly
rate of
4 per
cent
from
January
to
December
2007.
The
ratio of
foreign
currency
deposits
to the
broad
money
supply
was
about 22
per cent
indicating
that
there
was
moderate
but not
strong
evidence
of
"dollarization"
during
2007.
However,
since
2007 and
over the
period,
April to
July
2008,
there
has been
significant
increase
in the
dollarization
of the
economy
coinciding
with the
depreciation
of the
Ghana
cedi.
The
ratio of
currency
outside
banks to
broad
money
supply
declined
in the
early
parts of
2007
increasing
slightly
from May
2007
indicating
a slight
deterioration
in the
financial
intermediation
of the
economy.
Reserve
money
grew at
a
monthly
rate of
7 per
cent in
2007. On
a
year-on-year
basis
there
was a 48
per cent
increase
over the
2006
amount.
This
growth
could be
attributed
to the
growth
in the
net
financial
assets
of the
Bank of
Ghana.
The
prime
rates
were
maintained
at 12.5
per cent
during
the most
parts of
2007 by
the seed
to 16.0
per cent
in May
2008 and
17.0 per
cent in
July
2008 to
tame
surging
inflation.
GNA