International Audit firm, KPMG, has stated that Ghana’s macro-economic outlook, beyond 2018, remains positive. This is as results of the country’s investments into oil and gas, manufacturing and mining which are expected to boost output and support broad-based economic expansion.
There are however some downside risks, which according to the International Audit firm stems primarily from potential exchange rate weakness which could eat into consumer purchasing power.
The report added that the economic output faces some risks if government borrowing crowds out private borrowers, dampening the expansion in credit to the economy. This was contained in the pre-budget survey conducted by KPMG and released on 15th October, this year.
The research conducted on August and September this year, surveyed 35 business leaders from various sectors of the economy for their perceptions of the business environment and the fiscal regimes that affect their business. The sectors surveyed included construction, financial services, hospitality, manufacturing, mining, oil & gas, pharmaceuticals and agribusiness.
Others were retail, transport and logistics, technology, consulting, among others. Companies surveyed comprised multinational, local, and small to medium sized enterprises.
The report sought to provide an analysis of the perception of the business community relative to the provisions of the 2019 budget statement while serving as pointers for government in their preparation of the 2020 budget. The survey looked at three key sections including identifying the impact of recent fiscal measures to businesses, perception of the business environment and climate, and possible initiatives the government could introduce in the 2020 budget to create a more conducive business environment.
The report attributed the steady improvements in the Gross Domestic Product (GDP) to a combination of prudent fiscal policy, the commencement of crude oil production and the implementation of flagship policies which have progressively restored confidence across key sectors.
Fastest Growing Economy
The KPMG report buttresses positive image of the economy painted by the International Monetary Fund (IMF) and the World Bank. The World Bank report released this month, said Ghana is among the fastest-growing economies in the world. The report which had six of the world’s ten fastest growing economies this year in Africa had countries such as Ghana, Ethiopia, Rwanda and Cote d’Ivoire as four of the best performing economies.
Impact on Businesses
Despite the positive outlooks, the KPMG report said recent tax initiatives introduced by the government have had significant impact on businesses. The introduction of the three per cent VAT Flat Rate scheme, the report said, has been a disincentive especially to wholesalers in the Fast Moving Consumer Goods (FMCG) sector. The report described the three per cent VAT flat rate as counterproductive. “The result of this phenomenon could be that government will record high VAT revenues whilst depleting the working capital of businesses.” The report said.
Depreciation of the Cedi
The report stated that the issue with sustained depreciation of the cedi remained a strong area of concern. The fall in the value of the cedi according to the report raised input costs and reduced margins.
“A combination of inflationary pressures, rising fuel prices and utilities are significant detractors to overall growth and profitability.” The report added.
Regulation of Expenditure
KPMG has thus suggested to government to regulate its expenditure pattern especially as the country approaches elections next year saying this will the prudent thing for government to do.
“Government’s ability to control its expenditure, among others, will be key in stabilising the cedi.” The report said.