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Government could miss 3% deficit target for 2019 – EIU

Jan. 5, 2018, 1:08 p.m.

Government has a slim chance of achieving its 2019 deficit target of three per cent, the Economist Intelligence Unit (EIU) in the UK has projected.

The EIU’s recent report indicated that: “Overall, although we do expect fiscal consolidation in 2018-19, the government's medium-term projection of a deficit equivalent to 3% of GDP in 2019 (from almost 8% under the NDC in 2016) is unlikely to be met”.

The publication explained that: “The election year of 2020 will almost certainly see faster spending growth, as well as tax cuts, with the deficit increasing to 4.9% of GDP (although this fiscal slippage will be much less than seen in the election years of 2016 or 2012)."

“A return to consolidation and a deficit of 3% of GDP is then forecast in 2022. The rate of decline in the fiscal deficit will only be enough to make a modest dent in the public debt burden, which will edge down from 72.1% of GDP in 2018 to 63.3% of GDP in 2022. Longer-term debt sustainability will require ongoing fiscal responsibility and continued robust levels of economic growth,” the report added.

Meanwhile, Currency Analyst, Sammy Ampah, has urged government to pay critical attention to the latest projections by the EIU that the Ghana cedi is likely to hit GHS6 to a dollar by 2022.

According to Mr Ampah, the projection should send a clear signal to the managers of the economy to implement stringent policies that will arrest the local currency from depreciating.

The EIU said their prediction is based on the tighter Monetary Policy in the US from the latter part of this year into next year and the renewal of political uncertainties associated with Ghana’s 2020 elections, as the basis for the prediction.

In an interview with Class Business, Mr Ampah believes government can reverse the trend only if it invests in the real sectors of the economy.

He said such reports are guides for the entities involved to plan well.

“They (government) need to look at being fiscally disciplined that we do not have those budget overruns that we used to have and government should manage the expectations of the people that they do not overspend.

“Government should look at how they can invest in the real sector to grow the economy because it seems all the programmes that they are investing in are more into the social side,” he added.