The ISSER cautions that Ghana could see rising poverty levels if economic growth stagnates, predicting a decline to 4% GDP growth in 2025. Key issues include reduced capital investment, missed fiscal targets, and dependence on domestic borrowing. Professor Quartey emphasizes the necessity for strict fiscal discipline and effective economic policies to avoid adverse impacts.
The Institute of Statistical, Social and Economic Research (ISSER) has raised concerns regarding the potential increase in poverty levels in Ghana if economic growth remains stagnant. Economic growth is predicted to decelerate in 2025, despite a recovery in 2024, due to constrained capital expenditure, stringent fiscal policies, and delays in the rollout of new economic initiatives.
Professor Peter Quartey, the ISSER Director, addressed stakeholders about the country’s economic forecast, reporting a 5.7% GDP growth in 2024, primarily attributed to advancements in ICT, construction, and mining. However, projections indicate a drop to 4% growth in 2025, which is below the Sub-Saharan Africa average of 4.2%, mainly owing to reduced capital investment, estimated at 2.5% of GDP, alongside the slow implementation of the 24-hour economy policy.
The fiscal landscape poses considerable challenges as Ghana missed its 2024 revenue and deficit targets. The fiscal deficit stood at 7.9%, contrasting with a revised target of 4.2%. Additionally, revenue was noted at 15.9% of GDP instead of the anticipated 17.4%, with expenditures exceeding projections. Professor Quartey expressed concerns regarding debt sustainability, despite a reduction in the debt-to-GDP ratio to 61.8% due to restructuring measures.
He warned against complacency, saying, “We’re inching towards the IMF’s recommended 55%, but complacency could plunge us back into crisis.” Relying on domestic borrowing may restrict private sector credit access and heighten interest rates, potentially stifling growth. Professor Quartey highlighted that businesses are already struggling with limited credit access and diminished demand as a result of lower household incomes.
Regarding revenue generation, Professor Quartey deemed the government’s goal of a 45.4% increase in income and property tax revenue for 2025 as overly ambitious. He queried the lack of new strategies to achieve this target while advocating for research-backed policies and timely mid-year reviews. He cautioned, “If we fail to monitor, we’ll face shortfalls and rush back to introduce new taxes mid-year.”
Additionally, he criticized the difficulties surrounding tax refunds, suggesting that inadequate refund processes dissuade compliance. He stated, “If businesses don’t believe they’ll get their money back, tax compliance will fall.” Furthermore, the economic outlook raised alarms about weakening sectors that traditionally drive employment and income.
Both the agriculture and industrial segments are expected to experience substantial growth declines, with agriculture projected at a mere 3.1% this year. The anticipated slow-down could lead to fewer job prospects and heightened living costs for households, particularly with the government pursuing an aggressive domestic revenue strategy.
The projected revenue increase could exacerbate household financial burdens if not managed appropriately. Professor Quartey advocated for fiscal responsibility laws’ strict enforcement to minimize unexpected budgetary alterations. He admonished, “We must stop recycling policies that lack data-driven foundations. Only then can we restore macroeconomic stability.”
The ISSER warns that Ghana may face worsening poverty levels due to sluggish economic growth projected for 2025, with contributing factors such as reduced capital expenditure and tightened fiscal policies. Although a rebound in 2024 is expected, the country must address significant revenue shortfalls and debt sustainability issues. The need for disciplined fiscal management and effective implementation of economic policies is crucial to prevent mid-year fiscal shocks and to sustain economic stability.
Original Source: www.myjoyonline.com
