Ghana revises down 2020 GDP growth forecast to 0.9% on COVID-19 crisis

Ghana has faced significant economic challenges in light of the COVID-19 pandemic, leading to a drastic revision of its GDP growth forecast for 2020. The country's Finance Minister, Ken Ofori-Atta, recently announced that the projected growth rate has been adjusted to 0.9%, a sharp decline from the initial 6.8% estimation. This revision was disclosed during the presentation of the mid-year budget review to the Parliament, where Ofori-Atta also requested approval for a supplementary budget of approximately 11.9 billion cedis. The impact of the pandemic on various sectors of the Ghanaian economy has been severe, prompting the need for substantial adjustments in financial planning and expenditure. To shed light on the implications of these developments, John Gatsi, the Dean of the School of Business at the University of Cape Coast in Ghana, provided insights during a CNBC Africa interview. Gatsi highlighted the ongoing stress on the economy caused by the pandemic and expressed concerns about the slow pace of recovery. The International Monetary Fund (IMF) had previously lowered its GDP growth forecast to 1.5%, indicating the challenging economic conditions faced by the nation. The further downward revision to 0.9% underscores the significant disruptions in economic activities across Ghana. While the government has implemented various monetary and fiscal measures in response to the crisis, including reductions in the policy rate and financial support initiatives, the decline in revenue remains a critical issue. Gatsi noted that the decrease in revenue is attributable to factors such as the impact on the oil and gas sector and international trade. Despite efforts to boost expenditure on essential items like personal protective equipment (PPE) and stimulus packages, the revenue generation remains a challenge for the government. The absence of a comprehensive and effective revenue mobilization strategy poses a considerable risk to Ghana's financial sustainability during the pandemic. As the country navigates the budgetary pressures, borrowing emerges as a primary alternative for funding. However, the rise in debt levels, with the debt to GDP ratio escalating from 62.4% to 67.1%, raises concerns about long-term implications. Gatsi highlighted the potential consequences of high debt accumulation, emphasizing the importance of securing measures such as debt suspension or forgiveness to alleviate the burden on the economy. Without significant interventions to address debt servicing challenges, Ghana may face hurdles in balancing repayments with essential investments in infrastructure. The Finance Minister's openness to additional borrowing, despite the associated risks, places emphasis on the need for strategic debt management and sustainable financial planning. The interview with Gatsi underscored the complex dynamics influencing Ghana's economic outlook and the critical decisions required to ensure long-term stability amidst the ongoing crisis.