Monday, 8 January 2018

3% deficit target for 2019 not achievable – EIU


Adnan Adams Mohammed

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The macroeconomic projections of the government have being challenged by the Economist Intelligence Unit (EIU).

The EIU has asserted that the government’s projection of attaining 3 percent fiscal deficit by 2019 will not be achieved.

The UK-based economic policy think-tank posited that, the government has only a slim chance of achieving the 3% deficit target.

The recently released EIU report indicated that: “Overall, although we do expect fiscal consolidation in 2018-19, the government's medium-term projection of a deficit equivalent to 3% of GDP in 2019 (from almost 8% under the NDC in 2016) is unlikely to be met”.

It explained that: “The election year of 2020 will almost certainly see faster spending growth, as well as tax cuts, with the deficit increasing to 4.9% of GDP (although this fiscal slippage will be much less than seen in the election years of 2016 or 2012).

“A return to consolidation and a deficit of 3% of GDP is then forecast in 2022. The rate of decline in the fiscal deficit will only be enough to make a modest dent in the public debt burden, which will edge down from 72.1% of GDP in 2018 to 63.3% of GDP in 2022. Longer-term debt sustainability will require ongoing fiscal responsibility and continued robust levels of economic growth,” the report added.

In line with the report, a financial analyst, Sammy Ampah, has urged government to pay critical attention to the latest projections by the EIU that the Ghana cedi is likely to hit GHc 6 to a dollar by 2022.

Mr Ampah is of the opinion that, the projection should send a clear signal to the managers of the economy to implement stringent policies that will arrest the local currency from depreciating.

The EIU said their prediction is based on the tighter monetary policy in the US expected from the latter part of this year into next year and the renewal of political uncertainties associated with Ghana’s 2020 elections, as the basis for the prediction.

In an interview with Mr Ampah, he said, government can reverse the trend only if it invests in the real sectors of the economy.

He said such reports are guides for the entities involved to plan well.

“They (government) need to look at being fiscally disciplined that we do not have those budget overruns that we used to have and government should manage the expectations of the people that they do not overspend.

“Government should look at how they can invest in the real sector to grow the economy because it seems all the programmes that they are investing in are more into the social side,” he added.

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