Ghana, like many other countries, has also not been spared by the devastating power of the coronavirus pandemic as its economy has also recorded its first ever recession in 37 years, with data from the Ghana Statistical Service showing a contraction of two straight quarters.
According to the latest GDP data, the economy contracted again in the third quarter by 1.1 percent, from the -3.2 percent recorded in the second quarter of 2020, thereby, sending the economy into recession and breaking a 37-year-long growth cycle, as the last ever recession was recorded in 1983 – a year characterized by political instability, hunger, and other economic unrests.
The hospitality sector is largely responsible for the third quarter’s contraction as the hotel and restaurants industry saw a contraction of 62.1 percent. It was followed by a 16.9 percent in the mining and quarrying sector.
In terms of real sector performance, the agriculture sector was the only to see growth, as it recorded an impressive 8.3 percent growth from the previous quarter’s performance of 2.5 percent. Whereas the other two sectors – industry and services – both saw a contraction of 5.1 and 1.1 percent in the third quarter.
Despite agriculture growing at a significant rate, this could not overturn the fortunes of the economy, considering the sector’s contribution to overall growth is smaller than the other two sectors. While agriculture’s contribution to GDP stands at 23 percent, industry and services contribution growth is at 35 and 42 percent respectively. That explains why a huge contraction in hospitality sector – which is a sub-sector under services resulted in an overall contraction of the economy.
In terms of the monetary worth of the economy, GDP at constant prices – taking the effect of inflation out – recorded GH¢41 billion, whereas GDP at current prices was GH¢92 billion.
Despite the record-breaking recession, government says it does not expect a further contraction as Finance Minister Ken Ofori-Attah has projected in the first quarter 2021 budget the economy to grow at 1.9 percent at the end of the year, against an IMF forecast of 0.9 percent.
The Bank of Ghana’s Composite Index of Economic Activity (CIEA) has also projected end of the year’s growth at 2 to 2.5 percent on the back of positive response across all sectors after government lifted almost all restrictions imposed to contain the spread of the pandemic in the country.
To ensure the economy is brought back to life, government has launched the ambitious GH¢100 billion Ghana Covid-19 Alleviation and Revitalisation Enterprises Support (Ghana CARES) programme.
The three-and-half-year programme dubbed ‘Obaatan Pa’, to be rolled out in two phases, aims to raise 70 percent of the financing from the private sector and the remaining from government to assist businesses surmount whatever challenge the pandemic brought on their operations.
The CARES programme will be carried out in two phases. The first is the stabilisation phase which aims at supporting enterprises recover. These include paying outstanding obligations to contractors and suppliers; injecting liquidity into the system and ease the cash flow difficulties of businesses; developing another programme to support large business hard hit by the pandemic; and also sourcing from the pharmaceuticals and textile & garment sectors and expand procurement from local producers for its goods and services.
Other interventions in the programme are establishing a guarantee scheme of up to GH¢2 billion to enable business to borrow from banks at more affordable rates; increasing funding to the CAP-BuSS Programme being run by National Board for Small Scale Industries (NBSSI); and providing seed-fund for a retraining programme to help workers who are laid off because of covid-19 to develop new skills.
The second, which is the medium-term revitalisation phase, will also include initiatives such as supporting commercial farming by complementing the Planting for Food and Jobs and the Rearing for Food and Jobs programmes; providing targeted support to enable the private sector accelerate progress in building Ghana’s light manufacturing, technology, and digital economy sectors.