Economic Growth Ghana's economy not expanding - Dr Osei-Assibey

According to him, the high cost of credit due largely to the high policy rate was impacting negatively on the economy and was largely responsible for the lack of growth.

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Dr Eric Osei-Assibey play

Dr Eric Osei-Assibey

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An economist from the University of Ghana, Dr Eric Osei-Assibey has bemoaned what he calls the crisis in which the Ghanaian economy has found itself.

According to him, the high cost of credit due largely to the high policy rate was impacting negatively on the economy and was largely responsible for the lack of growth.

READ ALSO: Economy records slow growth in Q2

Ghana’s economy is currently facing slow economic growth, high inflation and rising unemployment. The private sector has suffered considerably as a result of high lending rates and the energy crisis, economists say.

play Dr Eric Osei-Assibey at the IEA Roundtable discussion

 

Speaking at an economic roundtable discussion organised by the Institute of Economic Affairs, (IEA), Dr Osei-Assibey said the country must move away from demand-driven policies and find appropriate policy recommendations to solve challenges in the economy.

“Already, interest rate is so high, like I mentioned 33%, that is on the minimum, it is about 35% in some of the banks, so that is already high. So that is really reducing access. Now beyond that because of the high non-performing loans that the banking sector has recorded over the last 5 months or so we are also beginning to contract loans.

"So when you look at the growth rate of credit to the private sector, it is on the decline. Last year, it averaged about 35%. This year as at June, it was 8% in terms of growth. So that really shows that credit is not being contracted reducing financial intermediation and that can worsen the private sector so the economy is not really expanding because there is not enough access to funds.

“And once the activities of the private sector that drives growth, if the private sector is not active, growth will be stifled,” he said.

He believes “Government’s ability to reduce domestic borrowing, freeing up resources for the private sector...will force the banking sector to begin to reduce interest rates.”

“If interest rate reduces and people can borrow to invest, in no time the economy will expand. Government is a biggest spender but by the fiscal consolidation government’s hands is tied. So government itself is not spending; the economy is not being driven and which means it is the private sector that has to take the centre stage in growing the economy,” he added.

Click here for Dr Osei-Assibey's analysis of Ghana's economy: IEA Roundtable Discussion.pdf

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