Sunday, 03 July

COVID lockdown cost 42K jobs, 770K wage cuts – Akufo-Addo; expects 5% GDP growth this year above IMF’s 3.2%

Nana Akufo-Addo

The government expects economic activity, “which has already picked up, to do so even further, following the ongoing vaccination exercise, and the easing of restrictions put in place to curb the effects of the disease”, President Nana Akufo-Addo has said.

“We expect GDP growth to rebound strongly this year to nearly five percent (5%), above the IMF’s 2021 January projection of 3.2% growth for sub-Saharan Africa for 2021”, the President said in his first State of the Nation Address of his second term on Tuesday, 9 March 2021.

“The medium-term outlook supported by the implementation of the Ghana CARES Programme is bright”, he said, adding: “We are confident that, together, we will emerge from the COVID-19 pandemic with a stronger and more resilient economy”.

The President observed that between 2017 and the first quarter of 2020, “we had made considerable gains in the management of the national economy, where we witnessed annual average GDP growth of 7%, single-digit inflation, reduced fiscal deficits with three consecutive years of primary surpluses, a relatively stable exchange rate, a significant improvement in the current account with three consecutive years of trade surpluses, strong foreign exchange reserve buffers, markedly reduced lending rates, and appreciable job creation”.

He said according to the COVID-19 Business Tracker survey conducted by the Ghana Statistical Service, in collaboration with the United Nations Development Programme (UNDP) and the World Bank, the COVID-19 pandemic has led to job losses, with many Ghanaian businesses and firms being forced to cut costs by reducing staff hours, cutting wages, and, in some cases, laying off workers.

This survey, the President noted, again, showed that about 770,000 workers had their wages reduced and 42,000 employees were laid off during the three-week partial lockdown imposed on the Greater Accra and Greater Kumasi Metropolitan areas and their contiguous districts Tema and Kasoa.

The government, however, “succeeded in protecting the jobs and incomes of all public sector workers”, he noted.

“Indeed, the cost of COVID-19 has been enormous. Our overall economic growth rate for 2020 was revised downwards from 6.8% to 0.9%. The non-oil economy was also revised from 6.7% to 1.6%. Revenue shortfall was estimated at GH¢13.5 billion, with additional expenditures related to stemming the tide of COVID-19 estimated at GH¢11.8 billion, with the combined effect amounting to GH¢25.3 billion, or 6.6% of GDP. The resultant fiscal deficit for 2020 was, thus, revised from 4.7% of GDP to 11.4% of GDP. This was done to reflect the impact of the pandemic”.

“The fiscal responsibility rule of keeping a deficit within a threshold of 5% of GDP and a positive primary balance for every year was suspended in 2020 to enable fiscal operations accommodate the impact of the pandemic”, he noted. 

The President recalled: “I indicated at the time that we know what to do to bring the economy back to life, what we do not know how to do is to bring people back to life. That is why Government did not hesitate to institute measures to protect the lives and livelihoods of Ghanaians, even if it was to the temporary detriment of our much sought-after fiscal stability.

“The formulation and implementation of the COVID-19 preparedness and response plan, tracing, testing, treatment, waiver of personal income tax and provision of an additional fifty percent (50%) basic salary allowance to healthcare workers, expanding the capacities of laboratories to increase COVID-19 testing, establishment of isolation centres in all regions and districts, fumigation of markets and schools, provision of food packages and hot meals for residents in areas affected by the partial lockdown, provision of free water for all households, provision of free electricity for lifeline consumers and a fifty percent (50%) discount for all other consumers, reduction in the Communication Service Tax (CST) from nine percent (9%) to five percent (5%), the institution of a seven hundred and fifty million cedi (GH¢750 million) loan facility for micro, small and medium enterprises through the CAPBUS Initiative, and the provision of a two billion cedi (GH¢2 billion) guarantee facility to support large businesses, such as schools and pharmaceutical companies, are amongst the several measures put in place by Government to cushion Ghanaians from the impact of the pandemic”.

Support, he noted, has also been forthcoming from the Bank of Ghana, under its “brilliant leadership, which has lowered the Monetary Policy Rate by one hundred and fifty (150) basis points to 14.5 percent, reduced the Primary Reserve Requirement from ten percent (10%) to eight percent (8%), reduced the Capital Adequacy Requirement from thirteen percent (13%) to eleven-point five percent (11.5%), and reduced interest rates based on the Ghana Reference Rate by two hundred (200) basis points”.

The Ghana Revenue Authority, he said, has also extended the dates for filing of taxes from four (4) months to six (6) months after the end of the basis year, issued a waiver on VAT, National Health Insurance Levy and GETFund Levy on donations of equipment and goods for fighting the pandemic, waived income taxes on Third-Tier Pension withdrawals, and permitted the deduction of contributions and donations towards COVID-19 as allowable expense for tax purposes.

“My government found the resources to cushion the impact of the pandemic because we are good managers of the economy, and we are good protectors of the public purse.

“The pandemic has exposed the need to expedite the process of moving Ghana to a situation beyond aid. That is why Government has developed and is currently implementing the one hundred-billion-cedi (GH¢100 billion) Ghana CARES ‘Obaatampa’ Programme to transform, revitalise and modernise our economy, and return it to high and sustained growth for the next three years”, he said.

The key projects under the CARES Programme include:

a)   supporting commercial farming and attracting educated youth into commercial farming;

b)  building the country’s light manufacturing sector;

c)   developing engineering/machine tools and ICT/digital economy industries;

d)  fast tracking digitalisation;

e)   developing Ghana’s housing & construction industry;

f)    establishing Ghana as a Regional Hub;

g)  reviewing and optimising the implementation of Government flagships and key programmes; and

h)  creating jobs for young people, and expanding opportunities for the vulnerable in society, including persons with disabilities.

He noted that the establishment of the National Development Bank, under the Ghana CARES programme, is expected to provide support to businesses in Ghana.