A new economic forecast by the World Bank suggests that Ghana will significantly outperform Africa as a whole this year, with regards to economic growth. The latest edition of the World Bank’s economic outlook for the continent African Pulse, released at the weekend projects economic activity will decline by 3.3 percent in 2020, the region’s first recession in 25 years even as the Bank of Ghana has revised the country’s projected Gross Domestic Product growth upwards to between 2.0 per cent and 2.5 per cent, based on the latest high frequency data available to it. Prior to the BoG ‘s latest upgrade the projection from the Ministry of Finance was for Ghana to achieve just marginal economic growth of about 0.9 per cent this year.
Instructively, Ghana is now expected to significantly outperform the West African region as whole – which the World Bank now expects to grow by an average of 1.4 percent this year, even as the region does better than the others around the continent.
This will give Ghana a crucial advantage with regards to attracting foreign direct investment from the rest of the world as the African Continental Free Trade Agreement (AfCFTA) commences in January 2021.
Importantly Ghana is now forecast to do much better than the West African sub region’s largest economy – and main competitor for FDI inflows – Nigeria which the World Bank expects to contract this year, having shrunk by a massive 6.1 percent year on year, as at August primarily due to the slump in global crude oil prices.
However, the Bank expects Africa’s economic recovery to begin in 2021, albeit slowly.
Meanwhile COVID-19 also threatens to push up to 40 million people into extreme poverty in Africa, eroding many of the development gains of the past decade. The analysis recommends governments seize the opportunity within the crisis to develop policies and prioritize investments that build greater resilience, boost productivity and generate jobs.
“Steady recovery in Sub-Saharan Africa after the COVID-19 pandemic requires policies that foster sustained growth and build resilience, but growth alone is not enough,” said Albert Zeufack, World Bank Chief Economist for the Africa regions. “African countries need to prioritize now policies and investments to create more better and inclusive jobs: that’s the key to the sustained, inclusive and resilient growth.”
The analysis recommends governments look to policies African countries need to move toward productivity-driven growth, and create more, better and inclusive jobs. While Pulse authors acknowledge that the road to recovery will be long and arduous—particularly as the region’s economic future remains uncertain amid concerns of a second wave of COVID-19 infections—they recommend governments aim to prioritize and support policies and investments that focus on connecting people to job opportunities, which can help end extreme poverty, particularly post-COVID-19.
The Pulse notes that the pandemic has also underscored the importance of the digital economy enabling governments, business and society in a time of lockdowns and social distancing, while recognizing government interventions to reduce the cost of devices and services, avoid disconnections for lack of payment, and increase bandwidth. These measures have been complemented by actions to facilitate network expansion and adopt new technologies, such as Google Loon in Kenya and Mozambique, and the boosting of internet efficiency in Ghana.
Noting that adoption of digital technologies by governments, households and firms in Sub-Saharan Africa still lag behind that of other regions in the world, the Pulse recommends improvements in areas from digital infrastructure and business models, to digital skills and literacy, as well as more effective regulation to expand digital infrastructure and make connectivity affordable, reliable and universal.
In addition to recommending reconstituting of fiscal space to help governments finance programs that will stimulate economic recovery, the Pulse also highlights the following areas for policy consideration:
Sectoral reallocation policies, to foster the shift from exporting raw materials to greater value addition and intra-Africa value chains. As global trade takes time to recover, policymakers in the region need to promote the development of regional value chains while they are building the foundations and capabilities needed for more comprehensive continental involvement. The African Continental Free Trade Area (AfCFTA) has an important role to play by reducing production costs associated to tariffs, non-tariff barriers and trade facilitation problems. The AfCFTA can also help organize production across the region, expand intra-regional trade and build resilience along supply chains.
Spatial integration policies, to foster agricultural productivity and reallocate resources to more efficient job-creating locations through enhanced rural-urban and inland-coastal connectivity and investing in cities. Well-functioning cities are the cradle of innovation and of higher productivity, tradable industrial and service sectors. Boosting agriculture productivity, and improving living conditions in rural areas, including food security, will play a critical role. Scaling up infrastructure spending to invest across urban and rural areas, particularly, expanding access to basic infrastructure services.