Before the census figures are released in January 2011, this classifies Ghana a middle-income status country ahead of oil revenues. The per capita GDP based on 24.3 million people translates to Gh₵1,843 ($1,289). There is a lot here for self-congratulation, but there are still missing links in the economy, which should have seen higher than the 60.3% change from the 1993 base to 2006.
The main ingredients for the revision are; a change in the base year from 1993 to 2006, improvements in the compilation methodology using 1993 accounting systems in place of the 1968 edition, improvements and revisions of data sources and finally a classification update to International Standard Industrial Classification 4 (ISIC4).
The rebasing not only changed the size of GDP, but also the growth rates, sectoral distributions and all related indicators that are driven by GDP.
Politically, the most significant change is the ratio of current account deficit to GDP ratio, a number used by the NDC government as an indictment of the previous NPP government’s lack of fiscal discipline and the main cause of all our fiscal woes. The 14.5% ratio translates to Gh₵2,712 billion (14.5% x Gh₵18,705). Expressed as a ratio of the rebased GDP figure, it reduces to 6.05% (Gh₵2.712 / Ghc44,798). This does not change the fact that the account was overdrawn by Gh₵2.7 billion.
As far back as 12 years ago, I questioned the size of the economy and wondered how Ghanaians managed to strive on. When in February 2010 the NDC government turned to the IMF and World Bank for assistance with the debt burden they inherited, it took no more than six months for them to announce that they had the economy under control with stringent fiscal discipline. If it was accurate, it was a miraculous turnaround. It is not that easy to dig out of a hole that deep in such a short time. The only way it could happen is if there is data missing from the accounting. In this case there is a huge chunk, part of which has been corrected by this rebased series.
At December 2000, the nominal GDP as recorded by the Bank of Ghana was $4,980 million. The current account deficit was $419 million and its ratio to GDP was 8.42%. This is what the NPP government inherited from the NDC. By December 2008 when the NPP left government, nominal GDP was $16,085 million, the current account deficit was $3,110 million and its ratio to GDP was 14.5% (note the currency denomination in order to provide better comparison). The NDC period covered 1993 to 2000 and the NPP covered 2001 to 2008.
The economy grew 3.2 times under the NPP Government and the current account deficit also grew 7.4 times. But on the back of higher GDP figures, the ratio now changes to 6.05% under the NPP government. The NDC period is unaffected by this rebasing.
With this revision, we need a fresh look at and a commonsense view of how the economy is turning.
The timing is right, even maybe too late in the day. First, we expect the budget to be read any time soon and the Government Statistician should have given government more time to factor these numbers into the equation. Second, the numbers are what they are. If this makes us a middle-income economy, then so be it. Third, if it means less donor support, then let’s gird up our loins and realize that our backs are up against the wall and it is time to start thinking better and smarter. Finally, we need professional integrity in these numbers and accuracy of reporting.
Ghana has become a service-based economy (51% of GDP) and it shows in our everyday lives. Trading, hotels and restaurants, information and communication, banking and insurance, real estate services, education, transport and storage etc., these are what we see around us all the time now. We import just about everything and the loss is reflected in industry (previously 28.3% now 18.6%).
Agriculture is now 30.2% of GDP and it shows. Despite everything said, agric is struggling to come alive. The evidence is in the market prices.
But, have we captured all the small micro type workers who do not file any returns and do not even report their income? Have we included the galamsey miners for who we have no law and no control over their production and sales? Have we recorded the transactions of all the wayside fitters and front side kiosks who “employ” their wives and children and do not report this as production? Have we identified the small susu companies and loan sharks out there who provide significant financial support and yet do not report these transactions?
There are two economies in Ghana. The regular formal sector in the national accounts and the informal sector, an unrestrained economy outside of much government regulation. The sector I label KIOSKENOMICS. The GDP should be higher than Gh₵44.8 billion.
By Sydney Casely-Hayford