Ernst & Young (EY) on July 11, 2012 said it sees economic growth in Ghana for 2012 remaining strong despite the slow pace of the rate, according to the accounting firm’s new report published July 11, 2012.
Robustness of the economy will be backed by the outflow of oil, the firm said in its Rapid-Growth Markets Forecast Summer edition July 2012.
It has therefore predicted that Ghana’s gross domestic product (GDP) will slow to about 8.5% in 2012 as the economy recorded an expansion of 14.4% in 2011.
“Growth will remain quite robust this year as oil output rises gradually, but the pace will slow to about 8.5% as the big jump in GDP seen last year drops out of the calculations,” the report said.
While Ghana will only be a small oil producer, E&Y observed that production of the commodity has boosted medium-term growth prospects. “We forecast GDP growth of around 7% in 2013 and an average of some 5% annually over the medium term,” it added.
E&Y opined that oil exports should also help to bolster the public finances and the balance of payments, which have been affected by higher government spending.
The firm noted that further rises in fuel prices are pushing inflation higher and, amid fears that the budget deficit might start to rise again ahead of the December elections, the key interest rate was raised by 100 bases points in both February and April, taking it to 14.5%. Ghana’s inflation averaged 8.7% in 2011.
Although exports climbed 60% last year on the back of oil exports and high commodity prices, E&Y said “a 46% jump in imports and rising net outflows of services and income meant that the current account deficit widened sharply to $3.7 billion in 2011, equal to about 9.4% of GDP.
The deficit is, however, forecast to start falling this year, it said.
The government of Ghana in a supplementary budget presented July 18, 2012 in Accra, revised its fiscal deficit to 6.7% of GDP.
“The revised revenue and expenditure estimates of the 2012 Budget will result in a cash deficit of GH¢4.6 billion, equivalent to 6.7% of Gross Domestic Product (GDP),” Dr Kwabena Duffuor, Minister of Finance and Economic Planning, told Parliament.
This is compared with the 2012 Budget estimate of GH¢3,369 million, or 4.8% of GDP.
Dr Duffuor indicated that a total amount of GH¢1.3 billion would be required to finance the revised budget deficit, of which foreign financing was estimated at GH¢205.50 million and domestic financing at GH¢1.09 billion.
“It is important to point out that while the new fiscal deficit target to be financed in 2012 is 6.7% of GDP. This is consistent with the deficit target agreed between the Government and the IMF,” Duffuor told the country’s legislators.
“Indeed, the IMF considers the new fiscal deficit as sustainable given the rapid growth of the economy and emerging challenges,” he added.
The government have asked Parliament for an extra GH¢2.6 billion expenditure for the remaining 2012 fiscal year.
By Ekow Quandzie