Transcript 2010 MDBS ANNUAL REVIEW - Ministry of Finance and …

MACRO-ECONOMICS
MDBS
Underlying Principles
11 May 2010
The macro-economy in 2009
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Economic growth and the real sector
Inflation
Fiscal deficit
Debt
External sector
Financial sector
Structural measures
Economic Growth
• GDP growth 3.5% (IMF) or 4.7% (APR)
• below 8% original target and 5.9% revised
target
• above SSA average of 2%
• Despite global recession and domestic
fiscal stabilisation
• Agriculture and favourable terms of trade;
but weaker services and industrial sector
Inflation
• 19.8% in January 2009
to a peak of 20.7% in July
• Decelerated to 15.9% in December 2009 (and
to 13.2% in March 2010)
[charts in APR, page 14]
• Missed initial target of 12.5%, but good
progress
• Stabilised exchange rate, good harvests, and
tighter macroeconomic policies contained
growth in aggregate demand
Fiscal Deficit
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Close to target, on a cash basis, but large
stock of arrears accumulated in 2008
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Cash basis: 14.5% of GDP in 2008
down to 9.7% in 2009 (target of 9.4%)
Commitment basis, including arrears:
20.1% down to 11.0 % of GDP
Revenue lower than expected, but
expenditure restrained (despite wage bill and
domestic interest payments)
New arrears accumulated (1.2% of GDP),
related to statutory funds
Debt
• Inevitably rising with a high fiscal
deficit, but came in just on target
(60% of GDP)
• Debt sustainability remains
‘moderate’ but risk of debt-distress
is increasing
• Arrears blur the picture on debt,
as do SOE liabilities
External Sector
• Positive overall BoP, despite reduced
capital inflows
• Current account deficit 5.1% of GDP,
better than targeted 13%
• Exchange rate stabilised
• Foreign reserves at 3 months of
imports
Financial Sector
• Withstood the global financial crisis
• Slower credit growth and tighter credit
conditions
• Non-performing loans grew sharply,
from 7.7% to 16.2% of gross loans by
December 2009
– public arrears, currency depreciation
and slower economic growth
Structural Measures
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Ghana Revenue Authority progress
Statutory earmarked funds:
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accumulating debt/arrears
transparency on funding and use of funds
Public wage bill not tightly constrained
Energy subsidies: electricity and fuel
Oil and Gas: regulation, revenue management,
economic impact
Public investment planning and project
assessment
Overview
Overall, the underlying principle of
continuing sound macroeconomic
policies and management
has been upheld
However, compared to the rest of Sub-Saharan
Africa, Ghana’s economy exhibits vulnerability:
– high inflation
– low foreign reserves
– large fiscal deficit
Looking Forward, 2010 and beyond
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Competitiveness in an era of oil revenue
Single-digit inflation - monetary policy
Fiscal deficit: commitment control,
revenues, investment, debt management
and project analysis, structural issues,
budget contingency, contingent liabilities
Crowding out of private sector credit
(arrears and domestic borrowing)
Structural issues...
Structural Measures (again)
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Statutory earmarked funds:
– debt/arrears
– transparency on funding and use of funds
– integrate with consolidated fund reporting
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Public wage bill more tightly constrained
Energy subsidies: electricity and fuel
Oil and Gas: regulation, revenue
management, economic impact (investment)
Public investment planning and project
assessment
Other issues going forward
• Targets
– budget
– revised budget
– APR
– BoG
• GDP rebasing
• Transparency - fiscal and monetary data;
more is available but irregular updating
Thank you