Data published by Ghana Statistical Service (GSS) has shown that the economy has emerged from recession in the pandemic year, as it moved from contraction in the second and third quarters to record growth in the last quarter of 2020.
The economy in the fourth quarter recorded 3.3 percent growth – an impressive outturn when compared to the two previous quarters which saw a contraction of 5.9 percent in the second quarter and 3.2 per cent in the third quarter of 2020, mainly occasioned by the devastating power of the coronavirus pandemic on economic activities.
In all, five sectors saw a contraction in the fourth quarter; of which the hotel and restaurant sector experienced the largest fall of -35.1 per cent. It was followed by electricity with a 15 per cent decline; mining and quarrying at -10.9 per cent; forestry and logging with -9.3 per cent; and professional, administrative and support had a contraction of 5.2 percent. This indicates the hospitality sector never recovered from the ravages of the pandemic last year, and remains the sector most heavily bruised by the pandemic.
In terms of sectors that experienced growth, the real estate sector surprisingly overtook the telecommunication and communication sector by growing at 43.5 percent while the latter grew at 22.5 percent.
In terms of the real sectors, the agriculture sector maintained its impressive form in this pandemic period by growing at 8.2 percent; and services came out of contraction and recorded growth of 4.6 percent. However, industry couldn’t break free from contraction and recorded -0.4 percent for the period.
However, despite agriculture leading in terms of growth, its contribution to the economy compared with the other two sectors was the smallest. The sector’s contribution was 21 percent while that of industry was 39 percent despite contracting; and services, as usual, topped with a 40 percent contribution to GDP.
In monetary terms, the value of goods and services produced in the fourth quarter at current prices was worth some GH¢101.8billion compared to GH¢91.2billion recorded in the same period of 2019.
The way forward
Government has set a five percent growth target for 2021, and outlined measures to help revive the economy from the havoc caused by the pandemic. To achieve this, government introduced new taxes in the 2021 budget aimed at raising more revenue to take care of COVID-19-related expenditure and provide support to other sectors.
Some of the taxes introduced include a new tax dubbed the ‘COVID-19 Health Levy’, which will see a one percentage point increase in the National Health Insurance Levy and a one percentage point increase in the VAT Flat Rate to support expenditures related to COVID-19.
In addition to this, government said it is proposing a Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under the Energy Sector Levies Act (ESLA); and a further Energy Sector Recovery Levy of 20 pesewas per litre on petrol/diesel under the ESLA as a means of finding additional resources to cover the excess capacity charges which have resulted from the Power Purchase Agreements (PPAs).
The implementation of these two proposed levies for sanitation and pollution as well as to pay for excess capacity charges, according to the budget statement, will result in a 5.7 percent increase in petroleum prices at the pump. What this essentially means is that prices of goods and services are likely to go up, as the effect of the increment will be to affect transport fares which will directly be passed on to consumers.
Besides these taxes, government has further slapped a financial sector clean-up levy of 5 percent on profit-before-tax of banks to help defray outstanding commitments stemming from the financial sector clean-up. The levy, the budget states, will be reviewed in 2024.