The World Bank has affirmed its forecast of 5.5% expansion of the Ghanaian economy in 2022, higher than Sub Saharan Africa average of 3.6%.
According to its latest Africa Pulse Report, ahead of the International Monetary Fund/World Bank Spring Meetings, the Bretton Wood institution however expressed worry about the country’s debt sustainability problems, which it described could erode gains going forward.
The World Bank said higher commodity prices are projected to support both recovery in the extractive sectors and boost exports and fiscal revenues. This will help ease some pandemic induced fiscal pressures and external financing needs.
However, it added that the moderate performance of economic growth reflects debt management problems that are still looming on the economy, with few prospects for improvement.
“In Ghana, the economy is projected to pick up pace in 2022, growing by 5.5%, then slowing gradually to 5% in 2024, lower than the pre-pandemic average growth, which was around 7%. This moderate performance reflects debt management problems that are still looming on the economy, with few prospects for improvement.”l
“Additionally, Ghana, Ethiopia, Malawi, and Mozambique fell short of replicating the success of most non-resource-rich countries in part because of elevated debt levels, and in some cases insecurity. In Ghana and Malawi, the disappointing performance underscores the poor management of public finances and, the need for significant growth enhancing reforms”, it said.
The Bretton Wood institution also commented on the Electronic Transaction Levy (E-levy) whose implementation will take off from May 1st, 2022. It said though the tax is expected to increase the tax base by generating about $1.1 billion in revenue, these efforts are not enough to address the country’s debt sustainability problems.
“To return to its pre-pandemic consolidation trajectory, the Government of Ghana proposed reforms that promote fiscal and debt sustainability. After resistance from the opposition, the Parliament approved the E-levy tax of 1.5% on digital transactions. The proposed tax is expected to increase the tax base by generating US$1.1 billion in revenue in 2022. Nevertheless, these efforts are not enough to address the country’s debt sustainability problems”.
Again, it said revenue from the mining sector remains weak, while pressing needs for government support continue to weigh on public finance.
Growth in Sub-Saharan Africa to decline to 3.6%
Growth in Sub-Saharan Africa is projected to decelerate from 4% in 2021 to 3.6% in 2022.
It is also estimated at 3.9% and 4.2% in 2023 and 2024, respectively.
The growth deceleration in 2022, the World Bank, said reflects several short-term headwinds, including the slowdown in the global economy particularly in the United States and China, lingering effects of the coronavirus pandemic, elevated inflation, rising financial risks owing to high public debts reaching unsustainable levels, continued supply disruptions, and the war in Ukraine.
“Given limited trade exposure, the impacts of the Russia-Ukraine conflict are expected to be negligible”, it added.
Of the region’s three largest economies, South Africa’s growth is expected to decline by 2.8 percentage points in 2022, dragged by persistent structural constraints, while Angola and Nigeria are projected to continue with the momentum of 2021, up by 2.7 and 0.2 percentage points, respectively, thanks partly to elevated oil prices and good performance of the non-oil sector.