Stanchart Reviews Ghana’s Growth Forecast
Standard Chartered Bank (SCB) has revised its 2010 growth forecast for Ghana from 5.9 per cent to 7.7 per cent.
The Head of Research and macro- economics for Africa at Standard Chartered Bank in London, Ms Razia Khan, said at a public lecture in Accra that the expected oil production in the last quarter of the year would mark a structural shift in the economy.
She, however, cautioned that Ghanaians should draw lessons from the experience of other countries that have had bitter experiences from oil production.
“We have to be careful here; because oil alone may not provide the much expected economic growth that Ghanaians needed so badly,” she said, adding that “it’s not a panacea for the much-anticipated economic growth.
“The temptation to focus much on oil to the neglect of other productive sectors of the economy should be avoided,” she insisted.
“What the Ghana Government should do in anticipation of oil revenue is to diversify the agricultural, manufacturing and other productive sectors of the economy,” she advised.
Ms Khan noted that Ghana’s economy was expected to benefit from its relative diversification, with agriculture remaining the focus in spite of the emerging oil industry.
The government is expected to continue to import subsidized fertilizer, hoping to encourage more large-scale commercial farming.
Ms Khan’s caution comes a day before the Managing Director of the World Bank Group, Dr Ngozi Okonjo-Iweala, at the end of a two-day official visit to the country. She also urged the government to focus on diversifying her economy and use the expected revenue from oil and gas for socio-economic development.
She said transparency, accountability, human resource development and use of local content in the oil and gas industry should be a means of managing the resource for development.
Dr Okonjo-Iweala noted that Ghana was exporting a million dollars of horticultural products annually, adding that recently, the exports had tripled, which was a sign of major improvement in the sector.
On the economic potential of the African continent, she said countries needed to focus on how to mobilize domestic resources to support private sector growth. She expressed confidence in the country's economic potentials and stressed that Ghana could practice value-added agriculture in order to create more jobs, especially for the youth.
But according to the Stanchart Africa research head, the official projection was that over the medium term, the country’s non-oil economy will grow at a rate of eight per cent. “While this appears a bit high to us, there is little doubt that Ghana stands to be one of the better performers in Africa,” adding that “by 2012, growth should be comfortably in the double digits,” the Stanchart research said.
She said Ghana’s biggest challenge would be to reduce domestic interest rates and prevent domestic debt from rising further.
“Given the recent increase in external debt, now at 31.8 per cent of Gross Domestic Product (GDP), further external issuance was unlikely.
The international financial institutions, which are already supporting Ghana’s economic recovery program, would likely frown on any new non-concessional borrowing”.
The year 2010 is expected to witness a sustained monetary easing cycle, driven by the need to bring down domestic debt service costs.