Business in Ghana

We Understand the issues that make the News

After Rebased GDP, Still Many Open Questions

Posted by Business in Ghana on November 7, 2010

By Sydney Casely-Hayford, www.bizghana.com

Ghana’s Gross Domestic product (GDP) was revised by the Government Statistician, Dr. Grace Bediako from Ghc24.1 billion to Ghc44.8 billion, Friday 5th November.  Before the census figures are released in January 2011, this classifies Ghana a middle-income status country ahead of oil revenues.  The per capita GDP based on 24.3 million people translates to Ghc1,843 ($1,289).  There is a lot here for self-congratulation, but there are still missing links in the economy, which should have seen higher than the 60.3% change from the 1993 base to 2006.

The main ingredients for the revision are; a change in the base year from 1993 to 2006, improvements in the compilation methodology using 1993 accounting systems in place of the 1968 edition, improvements and revisions of data sources and finally a classification update to International Standard Industrial Classification 4 (ISIC4).  Long overdue.

The rebasing not only changed the size of GDP, but also the growth rates, sectoral distributions and all related indicators that are driven by GDP.

Politically, the most significant change is the ratio of current account deficit to GDP ratio, a number used by the NDC Government as an indictment of the previous NPP Government’s lack of fiscal discipline and the main cause of all our fiscal woes.  The 14.5% ratio translates to Ghc2,712 billion (14.5% x Ghc18,705).  Expressed as a ratio of the rebased GDP figure, it reduces to 6.05% (Ghc2.712 / Ghc44,798).  This does not change the fact that the account was overdrawn by Ghc2.7 billion.

As far back as 12 years ago, I questioned the size of the economy and wondered how Ghanaians managed to strive on.  When in February 2010 the NDC Government turned to the IMF and World Bank for assistance with the debt burden they inherited, it took no more than six months for them to announce that they had the economy under control with stringent fiscal discipline.  If it was accurate, it was a miraculous turnaround.  It is not that easy to dig out of a hole that deep in such a short time.  The only way it could happen is if there is data missing from the accounting.  In this case there is a huge chunk, part of which has been corrected by this rebased series.

At December 2000, the nominal GDP as recorded by the Bank of Ghana was $4,980 million.  The current account deficit was $419 million and its ratio to GDP was 8.42%.  This is what the NPP Government inherited from the NDC.  By December 2008 when the NPP left government, nominal GDP was $16,085 million, the current account deficit was $3,110 million and its ratio to GDP was 14.5% (note the currency denomination in order to provide better comparison).  The NDC period covered 1993 to 2000 and the NPP covered 2001 to 2008.

The economy grew 3.2 times under the NPP Government and the current account deficit also grew 7.4 times.  But on the back of higher GDP figures, the ratio now changes to 6.05% under the NPP government.  The NDC period is unaffected by this rebasing.

With this revision, we need a fresh look at and a commonsense view of how the economy is turning.

The timing is right, even maybe too late in the day.  First, we expect the budget to be read any time soon and the Government Statistician should have given Government more time to factor these numbers into the equation.  Second the numbers are what they are.  If this makes us a middle-income economy, then so be it.  Third, if it means less donor support, then let’s gird up our loins and realize that our backs are up against the wall and it is time to start thinking better and smarter.  Finally, we need professional integrity in these numbers and accuracy of reporting.

Ghana has become a service-based economy (51% of GDP) and it shows in our everyday lives.  Trading, hotels and restaurants, information and communication, banking and insurance, real estate services, education, transport and storage etc., these are what we see around us all the time now.  We import just about everything and the loss is reflected in Industry (previously 28.3% now 18.6%).

Agriculture is now 30.2% of GDP and it shows.  Despite everything said, agric is struggling to come alive.  The evidence is in the market prices.

But, have we captured all the small micro type workers who do not file any returns and do not even report their income?  Have we included the galamsey miners for who we have no law and no control over their production and sales?  Have we recorded the transactions of all the wayside fitters and front side kiosks who “employ” their wives and children and do not report this as production?  Have we identified the small susu companies and loan sharks out there who provide significant financial support and yet do not report these transactions?

There are two economies in Ghana. The regular formal sector in the national accounts and the informal sector, an unrestrained economy outside of much government regulation.  The sector I label KIOSKENOMICS.  The GDP should be higher than Ghc44.8 billion.

 

Advertisements

7 Responses to “After Rebased GDP, Still Many Open Questions”

  1. NANA Ø-Ø said

    I am waiting to see how the NDC cohorts are going to jubilate about the rebasing. The last time they said it was driven by cocaine. By the way the service sector is not 51% of GDP.

  2. Noko Bi said

    If the KIOSKENOMICS are included, the GDP should be higher than Ghc44.8billion. But what do we do about the fact that this sector and indded farmers, also have no pesion contribution and are not paid any when they grow old? What do we do about that.

    I agree with you that if Ghana is now a middle income economy, we do not need to worry about what we would lose from the World Bank and the IMF. We should get on our bike and get doing by ourselves, for ourselves. When you know you are travelling on your own, you wait for nobody. It is a blessing

  3. Thanks a lot for bringing light to this subject. For years I have been wondering how long it would take for our leaders to take hold of the economy in realistic terms. What you said about KIOSKENOMICS is so true. I went to Ashaiman -Tulaku live stock market- to get me a sheep and during the two hours that I was there I saw over 50.000 cedis change hands with no receipts given or any type of record made on the sales. And this is in the Accra region. Once one is out of Accra all business transactions is done in pure liquid cash. So I agree with you the GDP should be higher than the 44.8 billion they are talking about if not double.

  4. An illumination – I have always opinionated you do not need university degree in economics or statistics to see that, most or greater part of our economy is in the unofficial or ‘black market’ or Kioskenomics, thus if our lazy-and-not-willing-to-learn policymakers will wake up and have a good study of this not-counted side of our economy it would yield positive results for the country and everyone living in it.
    Two benefits that come to mind are, more people to pay taxes and low taxes for the population at large. Also we would stop spending stupid money when it comes to funerals whilst we cannot pay a minimal Health insurance.

    In conclusion I would expect the President who is supposed to be a tax expert lawyer to pursue this area seriously if he is serious about building a better Ghana for now and the future and not empty slogans.

  5. Kwabena Opong said

    Our experts are coming round after all after relying on the World Bank for all these years. I only wish they cease politicizing such issues.

  6. Adu Kiu said

    Your mode oof describing everything in this post is in fact pleasant, all be capable
    of without difficulty understand it, Thanks a lot.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: