The International Monetary Fund (IMF) has dropped Ghana’s growth rate to 1.6% for 2023, from the earlier projection of 2.8% in the Fund’s April 2023 World Economic Outlook (WEO) report.
The latest growth projection comes on the back of the World Bank cut the country’s growth rate forecast for 2023 to below 2%.
The Fund cited fiscal slippages as a result of high debt and budget deficit, reducing government spending in infrastructure and investments, as the major reasons.
It however predicted a 2.9% expansion of the economy in 2024.
For emerging market and developing economies, the report said economic prospects are on average stronger than for advanced economies, but these prospects vary more widely across regions.
On average, growth is expected to be 3.9% in 2023 and to rise to 4.2% in 2024.
The forecast for 2023 is modestly lower by 0.1 percentage point than in the January 2023 WEO Update and significantly below the 4.7% forecast of January 2022.
In low-income developing countries, Gross Domestic Product is expected to grow by 5.1%, on average, over 2023–24, but projected per capita income growth averages only 2.8% during 2023–24, below the average for middle-income economies (3.2%) and so below the path needed for standards of living to converge with those in middle-income economies.
The IMF report further noted that the achievement of strong, sustainable, and inclusive growth will require policymakers to stay agile and be ready to adjust as information becomes available.
The report admitted that policymakers had little room for operation and had to walk a tight rope to achieve the desired recovery.
“With the thickening fog around current and prospective economic conditions, policymakers have a narrow path to walk toward restoring price stability while avoiding a recession and maintaining financial stability,” the April 2023 report said.
Ensure a durable fall in inflation
With inflation still well above targets for most economies, the priority remains reducing inflation and ensuring that expectations stay anchored while containing financial market strains and minimizing the risk of further turbulence.
The IMF reckoned that achieving the desired inflationary levels in the midst of heightened market volatility and a sizable disconnect between markets’ anticipation of monetary policy paths and central bank communications would require a steady but ready monetary policy, clear communication, safeguarding financial stability, and monitoring risks
A return of the world economy to the pace of economic growth that prevailed before the bevy of shocks in 2022 and the recent financial sector turmoil is increasingly elusive.
More than a year after Russia’s invasion of Ukraine and the outbreak of more contagious
COVID-19 variants, many economies are still absorbing the shocks. The recent tightening in global financial conditions is also hampering the recovery.
As a result, many economies are likely to experience slower growth in incomes in 2023, amid rising joblessness.
Moreover, even with central banks having driven up interest rates to reduce inflation, the road back to price stability could be long. Over the medium term, the prospects for growth now seem dimmer than in decades.