It additionally asked that it took steps to improve domestic resource mobilization.
This was contained in the WB’s third edition of the Ghana Economic Update – focusing on agriculture as the engine of growth and jobs creation, made available to the Ghana News Agency (GNA) in Accra.
The Bank gave positive assessment of the country’s macroeconomic performance and said it had improved in 2017 after a difficult 2016.
The economy expanded for the fifth successive quarter in 2017, September, at a rate almost twice that of year 2016.
It indicated that the service sector bounced back and that the fiscal consolidation was paying off with inflation down to close of 10 per cent.
The report predicted a likely inflation fall to within or close to the Bank of Ghana’s medium-term target range of 6-10 per cent in 2018.
It said based on the 2017 trends and sustained fiscal consolidation the fiscal deficit could fall within the government’s target of below five per cent of Gross Domestic Product (GDP) from 2018 onwards.
“To sustain the fiscal consolidation efforts, two areas are particularly important over the medium-term – domestic resource mobilization and expenditure controls.
Despite the positive outlook, challenges remain, including further containing inflation and strengthening and deepening the financial sector to lower interest rates.”
The report pointed out that “Ghana’s economic performance over the medium term will to a large extent depend on the success of the economic stabilization programme”.
It added that fiscal consolidation would only be sustainable when social and economic activities could thrive in an expanding and increasingly diverse economy.
The higher financing costs in both the domestic and external markets in the context of a strong United States (US) dollar and rising global bond yields was also highlighted.
It stated that with the right reforms, agriculture had the potential to become one of the leading sectors for a more diverse economy – transformed into an engine of growth and job creation.
According to the report, agriculture had large multiplier effect on employment, creating in excess of 750 jobs for every additional US$1million of output.
It recommended three policy options to strengthen the agriculture sector: improving the quality and effectiveness of public expenditure, the environment for agriculture businesses to promote value addition and fixing challenges in the cocoa sector given the large size of the cocoa economy.
Mr. Henry Kerali, WB Country Director for Ghana, said “the macroeconomic outlook was largely positive based on the 2017 performance.”
The external position, he noted, had improved as the trade balance shifted to a surplus.
“Ghana has made good progress in macro-stabilization in 2017, but it needs to sustain the fiscal consolidation efforts.”
Mr. Michael Geiger, Senior Economist and co-author of the report, the country’s heavy reliance on primary commodities, including cocoa, gold, and oil -all prone to volatility in international commodity prices – could create uncertainty about its actual future paths for growth, inflation, export receipts, and domestic revenue.
Mr Hardwick Tchale, Senior WB Agriculture Economist, who co-authored the report, said “there is need to channel public resources into research to increase the use of technology, invest in irrigation infrastructure to increase productivity and mitigate the potential adverse effects of climate change, and leverage increased private sector investment in agriculture”.