The Economist Intelligence Unit (EIU) has hailed the government’s industrialization drive under its flagship One District One Factory initiative and the banking sector clean up.
In its latest country report on Ghana which partly analyzed the impact of the Coronavirus pandemic on the Ghanaian economy, the EIU said the initiatives by the Akufo-Addo government will contribute immensely to the strengthening of the Ghanaian economy, which has been hit by the effects of the pandemic, just as other countries in the world.
“With key revenue targets plummeting, including a sharp drop in oil revenue, the EIU noted that the industrialization drive and the banking clean up will help in non-oil growth. The government’s industrialization push and moves to strengthen the banking sector will benefit non-oil economic growth, although the cost of capital will remain a constraint,” the report noted.
The EIU further observed that progress in the government’s quest for massive industrialization has been significantly stalled by the effects of the Coronavirus.
However, it remains hopeful that should its prediction that President Akufo-Addo will be re-elected come to pass, the government will breathe more life into the industrialization drive which will serve as a catalyst for the strengthening of the economy.
“The NPP’s plans for more rapid industrialization have been temporarily overshadowed by the coronavirus,” said the EIU report.
“In particular, progress on the NPP’s flagship One District, One Factory (1D1F) initiative has been patchy, with results generally falling behind targets. If, as we expect, the NPP is re-elected, we believe that there will be an attempt to breathe fresh life into the initiative.”
On the general outlook of the Ghanaian economy post Coronavirus, the EIU predicted positive real GDP growth in 2021, a slower pace of depreciation, lower inflation among other positive forecasts.
Coronavirus impact on global economy
The EIU also analysed the impact of the Coronavirus on global economy and its verdict is predictably dire.
“We forecast that global output will contract by 4.8% year on year in 2020 and that global trade will decline by 22.6%. Global GDP will not recover to pre-coronavirus levels before at least 2022; 2020 and 2021 will be lost years for growth.”
“Real GDP will contract in all regions of the world, but the drop in output will be especially severe in OECD countries. All G7 countries and almost all G20 countries will experience a full-year recession in 2020. We expect China’s real GDP growth to slow sharply to 1.4% this year and forecast a full-year recession in the US, with a contraction of 4.8%. We assume that oil prices will decline by more than 37% this year, to average US$40/barrel.”
“Most countries have responded with huge fiscal expansion to support businesses and households, raising the risk of sovereign debt crises in the medium term. Central banks have cut interest rates and, more importantly, have stepped up as buyers of last resort for government and corporate debt. Europe is heading towards a historic recession this year.”