April 9, 2014 / 11:40 AM / in 6 years

Ghana's economic growth slows to 7.1 pct in 2013

ACCRA (Reuters) - Ghana’s economic growth slowed to 7.1 percent in 2013, less than the government’s target of 7.4 percent, as agriculture held the economy back, the national statistics service said on Wednesday.

General view of the Tema oil refinery near Ghana's capital Accra. REUTERS/Yaw Bibini

Ghana is one of Africa’s strongest economies, recording growth of 8.8 percent in 2012. However, the government is wrestling to stabilize the macroeconomy while dealing with a host of fiscal problems.

Economic growth in 2013, exceeding oil production, stood at 6.5 percent, the statistics office said. It revised third quarter 2013 economic growth to 4.9 percent from 0.3 percent because of improved data.

Services grew the most, 8.9 percent. Industry expanded 7 percent. Agriculture brought up the rear, rising just 5.2 percent, government statistician Philomena Nyarko told a news conference. The growth helped per capita income rise to $1,838 in 2013 from $1,603 in 2012, Nyarko said.

Ghana’s growth would already be the envy of most Western economies. It stands well above the 2013 average for sub-Saharan Africa of 4.7 percent, according to World Bank figures. [ID:nL6N0MZ2TQ] But its 7.1 percent growth is likely be taken as evidence fiscal instability is starting to blunt expansion after five years of sustained growth above 8 percent.

The government’s balance of payments gap and fiscal deficit, which stood at 10.8 percent in 2013, rank among the highest in Africa. Its currency has also fallen 14.6 percent so far this year against the U.S. dollar, a fact economists blame partly on fiscal instability.

Inflation in March rose to a four-year high of 14.5 percent from 14.0 percent the month. Increases in the prices of housing, water and electricity helped lead the gains, the statistical service earlier on Wednesday. [ID:nD7N0MU000]

“LOSS OF GROWTH MOMENTUM” “Of greater concern (than inflation) is the evidence of a continued overall loss in growth momentum,” said Razia Khan, head of Africa research at Standard Chartered.

Weak growth might further weaken Ghana’s revenue collection. Any losses would only partly be offset by the boost to nominal GDP growth from inflation. 

Another economist challenged the veracity of the growth figures. To arrive at full-year GDP growth of 7.1 percent, the government would also to raise its ignificantly have to revise upwards growth for the first half of the year.

In one example, the International Monetary Fund put 2013 growth at 5.5 percent, significantly lower than the statistical service figure.

Any doubt about the statistics would deepen a problem for the government of President John Mahama, which already faces concerns raised by the ratings agency Fitch. Official analysts said its projections for reducing inflation and a fiscal deficit lacked credibility.

Nyarko defended the statistical service and said the revised figures were based on new and better data.

“Obviously there is a jump in the figures because we did not have complete data at the time of the first release,” she said.

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