Transcript Aiming for Middle Income Country Status: What are the Growth

INTERNATIONAL FOOD
POLICY RESEARCH INSTITUTE
sustainable solutions for ending hunger and poverty
Ghana Strategy Support Program
Aiming for Middle Income Country Status:
What are the Growth Options?
Xinshen Diao, Clemens Breisinger and
James Thurlow
November 16, 2007
Accra, Ghana
Outline
• International experiences and challenges for
Ghana on the way to MIC status
 Accelerated growth challenge
 Structural change challenge
 Export diversification challenge
• Growth options for reaching MIC goal
 Agriculture as a main driver
 The role of manufacturing
 The role of services
• Divergence in regional income and poverty
reduction
Ghana Strategy Support Program
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Accelerated growth is needed, but
required growth rates vary across countries
# of years to
become a MIC
When
Annual GDP
growth rate
Brazil
9
1965 – 1974
9.9
Malaysia
12
1965 – 1977
7.1
Thailand
11
1976 – 1987
6.1
China
8
1993 –2001
9.2
India
?
1992 – ?
6.0
Vietnam
?
1997 – ?
6.6
Ghana
10 (goal)
2005 – 2015 (goal)
5.5 (last 5 yrs)
Country
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Manufacturing or export-oriented services
led structural change
Sector share:
Agriculture (%)
Manufacturing (%)
Services (%)
Beginning
End
Beginning
End
Beginning
End
Brazil
19
13
26
31
48
47
Malaysia
29
27
9
19
44
37
Thailand
27
16
20
24
46
51
China
19
14
34
32
34
41
India
31
21
16
16
42
52
Vietnam
27
22
15
20
44
38
Ghana
39
Country
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10
33
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Rapid and diversified export growth required
Export
growth
(%)
Share of ag in
total exports
(%)
Beginning End
Share of a commodity
in total ag exports
(%)
Beginning
End
Brazil
19.4
66
55
Coffee
72
31
Malaysia
15.4
46
29
Rubber
84
79
Ghana
9.0
(last 5
yr)
72
(2005)
Cocoa
45
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Growth options for Ghana to become a MIC
Agriculture will remain the main driver
• 40% of GDP currently
• 5.7% of average annual growth rate over the last
6 years, higher than GDP growth rate
• Agriculture will remain the most important
contributor to MIC goal if its growth momentum
can be maintained
• Reaching CAADP’s 6.0% growth target can
further enhance agriculture’s role in total growth
Ghana Strategy Support Program
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
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Growth options for Ghana to become a MIC
Manufacturing growth may play a limited role
• Small initial size limits its influence to economy-wide
growth even with very high growth
• High dependency on agricultural inputs and hence on
agricultural growth
Services have strong growth linkages
• Half private services are domestic market oriented and
50% larger than whole manufacturing
• Through lowering transaction costs and increasing
competition, service sector’s productivity and efficiency
create growth outside services
Ghana Strategy Support Program
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
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Factors affecting Ghana’s growth options
• Need to prepare for possible shocks in world
commodities prices, e.g.,
• Sudden decline in cocoa prices?
• Sharp rise in food crop prices (maize and wheat)
driven by bio-fuel development?
• Changing climate and its effect on agriculture?
• Oil discovery: blessing or curse?
Changes in these external and internal
conditions may alter Ghana’s growth options
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Linking growth to poverty reduction
poverty rate (%)
p.c. income (US$)
30.0
950
26.0
850
22.0
750
M IC
Base
Base
M IC
18.0
650
14.0
550
10.0
450
2005
2007
2009
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2011
2013
2015
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Poverty remains a challenge in North
Base 2015: 14.0%
Current poverty rate 28.5%
South
North
Poverty rate
45.1%
South
North
MIC 2015: 9.5%
South
Poverty
rate
62.7%
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\
North
Poverty
rate
35.1%
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Balancing growth and poverty reduction
in lagging region
• Greater attention to agricultural activities
benefiting a majority of Northern farmers: cereals
and livestock
• Development of high value commodities suitable
for Northern savannah zone
• Increasing trade with neighboring countries to
open new opportunities in agricultural and nonagricultural sectors
• Realization of potentials depend on infrastructure
improvements and service provision
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