Agricultural sector can lead economy with right reforms - World Bank
The World Bank says with the right reforms in Ghana, the agricultural sector has the potential to be one of the leading sectors for a more diverse economy, which can be transformed to become an engine of growth and job creation.
The bank said agriculture had a very large multiplier effect on employment, creating more than 750 jobs for every additional $1 million of output.
Mr Kwabena Gyan Kwakye, an economist at the World Bank, presenting the Third Edition of the Ghana Economic Update report said, even though the importance of the extractive sector had risen, it appeared that the agriculture sector growth had slowed.
On options to strengthen the agricultural sector, he said improving the quality and effectiveness of public expenditure in the area would be important in the context of limited fiscal space.
Improving the environment for agriculture businesses was also key to adding value to the existing production and for jobs creation, he said.
“Government needs to fix the challenges in the cocoa sector, given the large size of the cocoa economy,” he added.
He said the economy expanded for the fifth successive quarter in September 2017, at a rate almost double that of 2016.
He said the update, which focused on agriculture as the engine of growth and jobs creation, indicates that the service sector bounced back and the fiscal consolidation was paying off.
“The inflation rate is also down, to close of 10 percent,” he added.
Mr Henry Kerali, World Bank Country Director for Ghana, said: “The macroeconomic outlook was largely positive based on the 2017 performance; GDP growth for 2017 is estimated to have almost doubled from the 3.7 percent in 2016, and is expected to stay at that elevated level through 2018.”
He said the external position had improved as the trade balance had shifted to a surplus, with Ghana making good progress in macro-stabilisation in 2017.
However, it needed to sustain the fiscal consolidation efforts.
According to the report, inflation is likely to fall within or be close to the Bank of Ghana’s medium-term target range of six to 10 percent in 2018 and based on the 2017 trends, and with sustained fiscal consolidation, the report expects that the fiscal deficit could fall within the government’s target of below five percent of GDP from 2018 onwards.
“To sustain the fiscal consolidation efforts, two areas are particularly important over the medium-term domestic resource mobilisation and expenditure controls,” the report says.
The report says despite the positive outlook, challenges remain, including further containing inflation and strengthening and deepening the financial sector to lower interest rates.
Ghana’s economic performance over the medium term will, to a large extent, depend on the success of the economic stabilisation programme.
The report recommends that the Government sustains the fiscal consolidation efforts and improve on domestic revenue mobilisation and forward-looking expenditure planning.
It, however, notes that fiscal consolidation would only be sustainable, when social and economic activities could thrive in an expanding and increasingly diverse economy.
“Ghana is also likely to face higher financing costs in both the domestic and external markets in the context of a strong U.S. dollar and rising global bond yields,” it adds.
Mr Michael Geiger, Senior Economist and co-author of the report said: “The country’s heavy reliance on primary commodities, including cocoa, gold, and oil—all prone to volatility in international commodity prices, is creating uncertainty about its actual future paths for growth, inflation, export receipts, and domestic revenue.”
“There is need to channel public resources into research to increase the use of technology, invest in irrigation infrastructure to increase productivity and mitigate the potential adverse effects of climate change, and leverage increased private sector investment in agriculture,” Mr Hardwick Tchale, senior agric economist and co-author, advised.