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Non-oil GDP growth very disappointing – IFS

By D.I.
Laary, GNA

Accra, July 27, GNA – The Institute for Fiscal
Studies (IFS), Ghana, has expressed satisfaction about performance of the
country’s economy in the first half of the year but says the growth rate of
non-oil Gross Domestic Product (GDP) is disappointing.

The Institute after reviewing the state of the
economy and the 2017 budget submitted that the prospects in the remaining half
of the year look promising.

“The overall real GDP growth of 6.3 per cent
projected for 2017, reflecting largely increased production of crude oil, is
encouraging,” IFS Executive Director Professor Newman Kusi told the press on
Thursday.

“Nevertheless, the IFS finds the rate of
growth of non-oil GDP very disappointing. This unfortunate development is
partly due to the government’s spending retrenchment.”

He said the cutback in government spending had
severely hit expenditure on goods and services, capital expenditure and arrears
payment.

He said the size of the expenditure cut was
GHC3.6 billion during the first four months of the year.

Prof Kusi said cutting back capital spending
and not paying valid arrears hold back economic activity with serious
consequences for domestic revenue mobilisation.

The IFS observation in its review of the 2017
Budget that the projected revenue increase of 33.5 per cent was on the high
side, given the slower projected nominal GDP growth and wide range of tax
reliefs being granted, has been proved right.

It said from developments so far, it was
obvious that the projected revenue for the year would be difficult to achieve
in 2017 unless new measures were introduced to grow the non-oil economy and
enhance revenue administration.

Prof Kusi also said the shortfall in revenue
seriously constrained government expenditure during the first half of the year
that included spending on critical capital projects, payments to statutory
funds and clearance of arrears.

“Adherence to the deficit target seems to have
become an overriding goal of the government,” he said.

“While we recognise government’s efforts to
stay within the projected deficit, the danger is that the much-depressed
spending could seriously constrain economic growth and job creation, and thus
domestic revenue mobilisation.” 

Dr John Kwakye, Director of Research at IFS,
noted that measures introduced by the government would make significant impact
on the economy in the second part of the year but economic managers ought to
address the implementation challenges.

GNA

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