ISSER Doubts Govt's Ability To Attain Fiscal Targets (September 25, 2012, Spread)

The Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, Legon, has lauded the government’s fiscal targets for 2012 and the measures to achieve them but maintains that achieving those benchmarks will be very difficult, in view of the anticipated spending on the December elections.

It has predicted that apart from the government’s election year spending, continuing the implementation of the Single Spine Pay Policy (SSPP) will also come with its own toll on the economy.

In a presentation preceding the launch of the ISSER State of the Ghanaian Economy in 2011 and Outlook Report in Accra Monday, the Deputy Director of the institute, Professor Felix Asante, urged the government to maintain policy credibility by not overspending in the run up to the December elections.

The report highlighted how the Ghanaian economy fared in 2011 in the midst of the global economic crises and gave an outlook for 2012, in addition to prescribing some antidotes to challenges it perceived were inimical to the growth of the economy in 2012.

It attributed the country’s growth in 2011 mainly to oil exports which started in 2011.

In the 2012 fiscal year, the government’s medium-term macroeconomic policy has been focused on three objectives, namely, preserving the gains of macroeconomic stabilisation and fiscal consolidation achieved since 2009, creating fiscal space for high-priority investments to spur long-term growth and development and maintaining inflation in single digits (with three months to end the year, the country’s inflation rate is 9.5 per cent).

However, the ISSER report noted that achieving the targets would be difficult.

Even more worrying, it said, was the lack of concrete policies to address the problem of inefficiency in public spending.

According to the report, “decline in the policy rate has not significantly improved lending rates and, therefore, has not stimulated private sector borrowing and investment”.

Prof Asante said the situation needed to be addressed to ensure that the private sector was able to create the much needed jobs.

According to the report, continuous implementation of the fiscal reform agenda was needed, especially in key areas, including tax administration and public financial management.

The document said economic growth in Ghana reached 14.4 per cent in 2011, far exceeding the global average from 2000 to 2007 of just above five per cent, making Ghana one of the fastest growing economies in the world.

On international trade, the report said Ghana continued to record strong trade performance, in spite of the weak global economic environment.

With the Eurozone yet to find a panacea to its economic crisis, it said, the threats to Ghana’s international trade and payments included the risk of increasing financial distress in the Eurozone, spilling over into a further slowing of the world economy.

While the Arab Spring might have bitten dust after toppling a number of leaders in the Arab world, the report saw the possibility of an oil price surge triggered by rising geopolitical tensions.

On the stock market, it indicated that “the market did not perform very well, compared to preceding years, and it is expected that this situation will not improve significantly unless there are conscious efforts to ensure macroeconomic stability, which will in turn attract both local and foreign investors to invest on the Ghana Stock Exchange”.

With unemployment issues dominating both economic and political discourse, the report said a way forward to consolidate the gains achieved so far was for the country to address the nagging youth unemployment situation and ensure that the SSPP, which constituted 67.7 per cent of public expenditure, increased productivity.

The Prof Vice-Chancellor of the University of Ghana in charge of Research, Innovation and Development, Prof John Agyapong, who launched the report, said it was time for academia to be involved in the country’s economic debate, since academia represented non-partisan interests.

.Prof John Gyapong, Pro. Vice Chancellor, University of Ghana, launching the State of the Ghanaian Economy Report, 2011 in Accra