Global growth is projected to slow from an estimated 6.1 per cent in 2021 to 3.6 per cent in 2022 and 2023.
This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January.
Beyond 2023, global growth is forecast to decline to about 3.3 per cent over the medium term according to the World Economic Outlook report released at the start of this year’s World Bank — International Monetary Fund (IMF) Spring Meetings which began yesterday in Washington DC, United States of America.
Dubbed “War sets back global recovery” it said the “War-induced commodity price increases and broadening price pressures have led to 2022 inflation projections of 5.7 per cent in advanced economies and 8.7 per cent in emerging market and developing economies—1.8 and 2.8 percentage points higher than projected last January.”
Ghana’s situation
Since the war began in Ukraine, the country has been witnessing a worsening economic situation.
Fuel prices at the pumps have hit record highs with price of diesel per litre selling beyond GH¢10 while petrol is slightly below.
Inflation has reached record highs for the first time in 13 years, hitting 19.4 per cent as the end of March.
The local currency, the cedi has also suffered some declines against the country’s major foreign trading currencies, particularly the United Stated dollar, losing almost 18 per cent in value to become one of the worst performing currencies in the world before the close of last month.
However, since the beginning of this month, the currency has shown some strength, a development which is expected to be sustained as the government prepares to access some $2 billion from the international commercial markets.
Govt vindicated
In their recent separate addresses to the nation in an attempt to restore hope to investors and the Ghanaian public, President Nana Addo Dankwa Akuffo-Addo, his vice, Mahamudu Bawumia and the Finance Minister, Ken Ofori Atta, have all blamed the current economic difficulties partly on the war.
For instance, the report equivocally stated that “The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution.
At the same time, economic damage from the conflict will contribute to a significant slowdown in global growth in 2022 and add to inflation.
Fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest.
A severe double-digit drop in GDP for Ukraine and a large contraction in Russia are more than likely, along with worldwide spillovers through commodity markets, trade, and financial channels.
As already witnessed in here in Ghana, the report was clear when it said that elevated inflation will complicate the trade-offs central banks face between containing price pressures and safeguarding growth. Interest rates are expected to rise as central banks tighten policy, exerting pressure on emerging market and developing economies.
Rebound imminent
In spite of the difficulties in the economy, there seem to be a positive trend evolving, an indication that, the economy will bounce back strongly, gauging from the first two months performance as put out by the Bank of Ghana.
The central bank’s report showed that high frequency indicators recorded broad-based improvement in most key real sector indicators in January and February this year, compared to the same period a year ago.
The central bank’s Monetary Policy report for March 2021 showed that domestic Value Added Tax (VAT) collections, retail sales, industrial consumption of electricity, private sector contributions to social security, vehicle registration and tourist arrivals, which it uses to gauge the health of the economy, all improved.
It said domestic VAT collections increased by 8.3 per cent on a year-on-year basis to GH¢571.46 million.
Retail sales increased by 7.1 per cent (year-on-year) to GH¢123.65 million in January 2022, up from GH¢115.47 million recorded in the same period in 2021. Compared to December 2021, however, retail sales declined by 45.1 per cent.
The relative year-on-year improvement in retail sales reflected increased household consumption during the review period,” the bank’s monetary report for March said.
The report showed further that activities in the manufacturing sub-sector, gauged by trends in the collection of direct taxes and private sector workers’ contributions to the Social Security and National Insurance Trust (SSNIT) Pension Scheme (Tier-1), recorded a positive performance in January 2022.
It said total direct taxes collected increased by 4.3 per cent (year-on-year) to GH¢1.43 billion in January 2022, relative to GH¢1.37 billion recorded in January 2021.
Conclusion
The Ghana Statistical Service is expected to announce the quarterly Gross Domestic Product today in what is expected to confirm the rebound of the economy as indicated by the Bank of Ghana.
Much as there are still some difficult times ahead in view of the raging conflict in Eastern Europe and the huge public debt overhang, the implementation of the Electronic Levy (E-Levy) and prudent management of the economy will likely see the economy through as the country inches towards achieving its growth target of at least 5.8 per cent by the close of the year.
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