The Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana has urged the government to intensify policies to support the manufacturing industry, as part of efforts to achieve the objective of increased local production and value addition.
ISSER’s Director, Professor Peter Quartey, reiterated that manufacturing has the ability to revolutionise the economy by expanding production and export base and directly increasing employment, income and state revenue.
This came at a point where the state of Ghanaian economy report 2022 by ISSER indicates that manufacturing has slowed down.
“After an impressive performance of 8.1 percent growth rate in 2021, the manufacturing sub-sector recorded a negative growth rate of 2.5 percent in 2022. A contributor of this negative growth could be the inflationary pressures experienced in 2022.
“The manufacturing sub-sector recorded the second highest Producer Price Index of 64.2 percent for the industrial sector. As of September 2022, three product groups out of the 23 product groups that make up the manufacturing sub-sector had inflation rates higher than the industrial sector average of 58.2 percent. In November 2022, the sectoral inflation rate was 84.3 percent and four product groups had even higher inflation rates,” says the ISSER report.
Professor Quartey, presenting the state of Ghanaian economy report 2022 and Quarter Three (Q3) Economic Performance in Accra, therefore noted that domestic initiatives should aim at increasing productivity and improving output in key primary sectors and value chains.
“Dependence on few primary commodity exports (mainly gold and cocoa) makes Ghana vulnerable to volatile commodity prices. Value chain structures must be modified to add value to primary products toward adapting to such price volatility
“The Government needs to commit to the IMF’s induced fiscal consolidation efforts to improve the business environment to draw investors,” he suggested.
The report further indicated that the industrial sector recorded a modest growth of 0.9 percent in 2022 following a poor performance in 2021 and 2020. However, Prof. Quartey noted that issues with high taxes and general cost of doing business is still a worry.
He also noted that: “Industrial sector’s recovery over the medium term will depend significantly on the extent to which policymakers are able to restore and consolidate macroeconomic stability in the medium term.”
To this end, he said the government must ensure prudent spending, reduce taxes on production, explaining that taxing production excessively is affecting industry, promoting imports and worsening the already high unemployment situation.
High taxes on food and beverages are also fuelling inflation and therefore a critical review of some of these taxes is imminent.
On sectorial improvement, the report indicated that the largest sector of the economy, services, recorded the highest growth rate (5.5 percent) in 2022, though considerably lower than the 9.4% recorded in 2021.
“The Services sector is expected to grow at 1.8 percent in 2023, 3.0 percent in 2024 and 5.0 percent in 2025. In all, the services sector is expected to gain significant benefits with the sealing of the IMF deal. The sector is expected to continue to show resilience and as a backbone to overall economic growth.
“Agriculture on the other hand grew by 4.2 percent in 2022, much lower than the 8.5 percent rate in 2021.
Information Communication Technology remains the best performing subsector though growth in 2022 is less than the 2021 rate. This may partly be due to the relative slowdown in the intensity of virtual services usage post pandemic,” it says.