Government’s Mid-Year Budget 2023 projects lower economic growth

The government is making key downward revisions to the macro-fiscal targets and Gross Domestic Product (GDP) projections for the year 2023 to reflect a slowdown in the economy.

The slowdown is attributable to difficult global conditions and the implementation of fiscal consolidation plan aligning with International Monetary Fund (IMF) supported Post COVID-19 Programme of Economic Growth (PC-PEG).

Mr Ken Ofori-Atta, the Minister of Finance, made this known when he presented to parliament, the Mid-Year Fiscal Policy Review of the 2023 Budget Statement and Economic Policy.

He announced revised GDP projections to include a downward overall Real GDP growth rate of 1.5 per cent from 2.8 per cent; a Non-Oil Real GDP Growth rate of 1.5 per cent from 3.0 per cent and an end-period headline inflation target of 31.3 per cent, from 18.9 per cent.

“Overall GDP Growth is, however, projected to rebound to 2.8 per cent, 4.7 per cent, and 4.9 per cent in 2024, 2025 and 2026, respectively. This is a result of implementation of growth-oriented and structural transformation strategies,” he said.

The minister also projected a deficit of 0.5 per cent of GDP compared to a surplus of 0.7 per cent of GDP on primary balance on a commitment basis, aligning with the IMF-supported PC-PEG target Primary balance.

He also projected a Gross International Reserves sufficient to cover at least 0.8 months of imports of goods and services by 2023.

“We have, however, been charged in the PC-PEG to develop an enhanced Growth Strategy supported by crowding in of private domestic and foreign investments to further boost growth. We are confident of a private sector outlook to boost growth and jobs,” he said.

Mr Ofori Atta explained that the drivers of the 2023 Fiscal Framework included the need to align the 2023 Mid-Year Review to the approved IMF-supported PC-PEG, shortfalls in revenues and lower spending for the first half of the year and the increase in base pay on Single Spine Salary Structure of 30 per cent compared to the assumed 20 per cent for the 2023 budget.

He also mentioned, “partial restoration of capped transfers to the NHIS and GETFund; the impact of the completed Domestic Debt Exchange Programme (DDEP) on debt service cost as well as on revenue mobilisation and the IMF ECF Programme disbursements for 2023 of US$1.2 billion,” he said.

He also indicated that the average crude oil price has been revised to US$74.0 per barrel down from the price of US$88.55 per barrel used in the 2023 Budget.

Accordingly, Mr Ofori-Atta said the total petroleum receipts have been revised downwards from US$1.54 billion to about US$1 billion, representing a 32 per cent decline.