Ghana is facing a challenging economic forecast for 2025, with GDP growth expected to fall to 4% from 5.7% in 2024. This slowdown is attributed to strict fiscal policies and reduced capital expenditure. ISSER Director, Professor Peter Quartey, cautions that poverty levels may worsen without substantial policy changes and effective revenue mobilization strategies.
The Institute of Statistical, Social and Economic Research (ISSER) has issued a warning regarding the potential increase in poverty levels in Ghana due to slow economic growth. While the country experienced a GDP growth of 5.7% in 2024, driven largely by sectors such as information and communications technology, construction, and mining, projections indicate a decline to 4% in 2025. This decline is attributed to reduced capital expenditures, stringent fiscal policies, and delays in new economic initiatives, notably the much-anticipated 24-hour economy policy.
Professor Peter Quartey, the ISSER Director, indicated that the lowered growth forecast is concerning and linked to diminished capital investment, expected to be at just 2.5% of GDP. He emphasized the 24-hour economy as a long-term strategy that will require time to produce results. Furthermore, he highlighted Ghana’s fiscal challenges, citing a fiscal deficit of 7.9% in 2024, which overshot the revised target of 4.2%. Revenue generation fell below expectations, further complicating the economic landscape.
Professor Quartey also addressed concerns regarding debt sustainability, despite a reduction in the debt-to-GDP ratio to 61.8% due to restructuring efforts. He warned that excessive domestic borrowing might impede private sector access to credit, subsequently increasing interest rates and hindering economic growth. This situation could lead to adverse outcomes for businesses already struggling with reduced credit availability and declining household incomes.
Moreover, the proposed target for increasing income and property tax revenues by 45.4% in 2025 was deemed overly ambitious by Professor Quartey. He questioned the mechanisms in place to achieve such an increase. Although he welcomed plans to utilize digital systems to enhance tax compliance, he stressed the necessity for evidence-based policies and mid-year fiscal reviews to avoid revenue shortfalls.
The article further explored the overall economic outlook, revealing weakening performance in key job-generating sectors such as agriculture and industry. Agriculture, which is a vital employment sector, is projected to grow only marginally, from 2.8% in 2024 to 3.1% in 2025, while industrial growth expectations have significantly declined. This deceleration may contribute to increased living costs and reduced job opportunities for households.
In light of these challenges, Professor Quartey called for strict enforcement of fiscal responsibility laws and regular reviews to manage the budget effectively. He emphasized the importance of employing data-driven policies to maintain macroeconomic stability.
In summary, Ghana’s economic outlook for 2025 appears precarious with projected growth slowing to 4%. This decline, brought about by tight fiscal policies and reduced capital investments, poses threats to job creation and household incomes. Professor Quartey’s recommendations highlight the need for disciplined fiscal management and a reconsideration of overly ambitious revenue generation targets to navigate the challenges ahead.
Original Source: www.myjoyonline.com
