The ISSER has warned that Ghana’s economic growth is projected to slow to 4% in 2025, raising concerns about increased poverty levels. Contributing factors include reduced capital investment, missed fiscal targets, and slow implementation of new policies. Professor Peter Quartey emphasized the need for disciplined fiscal management to avoid repeating past mistakes, as key sectors show signs of weakness and household budgets face pressures from proposed tax increases.
The Institute of Statistical, Social and Economic Research (ISSER) has highlighted potential increases in poverty levels in Ghana if economic growth continues to falter. Although a rebound is expected in 2024, the growth rate is anticipated to decrease to 4% in 2025, which remains below the Sub-Saharan Africa average of 4.2%. ISSER Director Professor Peter Quartey attributes this decline to diminished capital investment and challenges in implementing new economic policies, such as the 24-hour economy initiative, which he notes will take considerable time to produce results.
Ghana’s fiscal outlook is presenting substantial difficulties, as evidenced by a fiscal deficit of 7.9% in 2024, higher than the revised target of 4.2%. Revenue generation was below expectations, reaching only 15.9% of GDP rather than the projected 17.4%. Professor Quartey voiced concerns about debt sustainability—while the debt-to-GDP ratio has improved to 61.8% due to restructuring, he warned against complacency as it risks reintroducing turmoil.
Professor Quartey cautioned against the government’s dependence on domestic borrowing, which could limit private sector access to credit and escalate interest rates. He highlighted ongoing business frustrations, particularly regarding reduced access to credit and weak demand stemming from low household incomes. Moreover, he expressed skepticism about the government’s ambitious plan to boost income and property tax revenue by 45.4% in 2025, questioning the effectiveness of outlined strategies to realize this target.
He advocated for the adoption of research-driven policies and the necessity of conducting mid-year budget reviews to include necessary adjustments. Moreover, the current system of tax refunds was criticized for its accessibility issues, which he noted could deter tax compliance. According to Professor Quartey, primary economic sectors, including agriculture and industry, are weakening, which could further contribute to declining job opportunities and rising living costs amid a stringent domestic revenue campaign.
He urged for efficient management to prevent household budgets from being overly strained by tax increases. To enhance fiscal discipline, he championed tight enforcement of fiscal responsibility laws, alongside ongoing evaluations to avert unanticipated mid-year fiscal crises. Finally, he emphasized that methodologies grounded in empirical data are essential for restoring macroeconomic stability rather than relying on outdated policies.
In summary, Ghana’s economic forecast for 2025 presents notable challenges, including a decline in projected growth and a concerning fiscal deficit. The risks of increasing poverty levels, tight fiscal policies, and dependence on domestic borrowing suggest the need for careful management of economic initiatives. ISSER’s call for research-backed policies and better tax compliance systems emphasizes the importance of data-driven governance in stabilizing the country’s economy.
Original Source: www.myjoyonline.com
