A key feature of all budgets are the macroeconomic targets set out in the respective statements.
The targets give an idea of the confidence level in the structure and fortunes of the economy for the period in question.
Before giving updates on progress made with the implementation of government’s programs and policies in 2020, as well as plans for the 2021 financial year, the Minister for Parliamentary Affairs and Majority Leader, Osei Kyei-Mensah-Bonsu, gave out the following key macroeconomic targets.
Overall Real GDP growth of 5%, End-period inflation of 8%, Fiscal deficit of 9.5% of GDP, and Gross International Reserves to cover not less than 4.0 months of imports among others.
After about half a year of economic activity, however, how well are we with meeting or missing the above targets?
Courage Martey is an economist with Databank, and he expressed strong reservations about the ability of government to achieve the Fiscal Deficit target.
“I believe this is the target that faces the biggest risk of not being achieved. If you follow the trajectory of poor performance of revenue despite efforts to contain expenditure growth, we are risking going above our 9.5% deficit target for the year. And so there is then a strong case to take a second look at our revenue expectations and tighten expenditure controls for the year.”
According to Mr. Martey the impact of COVID-19 will be telling on the overall growth of the economy this year.
“Given the resurgence in COVID-19 cases and slow pace of vaccination, there is an increasing downside risk to growth to the recovery. So no doubt we are going to experience a recovery, and it appears the recovery will be above 3% this year. It appears we might likely see a favourable base effect in the 2nd and 3rd quarters of this year to push growth above 4% this year. But are we likely to hit 5% this year on account of this resurgence in COVID-19 and also the slow base of vaccination? It looks doubtful.”
Even though inflation at the end of June stood at 7.8%, 2 percentage points below the end of year target, the economist was sure the target will be missed come December 31, 2021.
“But when it comes to inflation target, it is 8%. Now to expect us to do 8% on account of expecting an uptick in inflation in the 2nd half of this year, that again might look unattainable. We might do above 8%. But if you look at the Bank of Ghana’s range of 6% to 10%, we are more likely to do below 10% by the end of this year.”