Friday, October 15, 2010
Duffuor says economy performing well
Accra, Oct. 14, GNA - The Minister of Finance and Economic Planning, Dr Kwabena Duffuor has repeated that the economy has performed reasonably well in recent years in spite of the fiscal and external imbalances witnessed in 2008, amidst the global financial crises.
Speaking to a cross-section of his staff on Wednesday, he said the large and timely policy responses initiated by the Government had made it possible for the economy to weather the storm.
"The NDC Government has implemented prudent fiscal and monetary policies, which have ensured fiscal sustainability and supported the domestic financial system", an official statement sent to GNA on Thursday quoted him as saying.
"Even in the presence of a cyclical downturn in economic activity, the government has proceeded with its fiscal consolidation plans for 2010 and the medium term", he added.
Dr Duffuor said that "though a little less than two years, the distance we have travelled these few months is remarkable. The benefits of the government's commitment to its economic programme are clearly visible. The decline in the overall budget deficit this year is both appropriate and achievable, and would leave fiscal room for an envisaged increase in social expenditures, while maintaining sizeable capital expenditures".
He added: "Government budget finances have been greatly improved, and coupled with monetary policy, helped to keep inflation low, providing a stable environment in which businesses and households could plan and undertake their economic activities."
Dr Duffuor emphasized that disciplined economic policies had contributed to the good economic performance over the period under consideration.
The Minister said they had prevented the build-up of imbalances that might, otherwise, threaten the economy, as occurred between 2007 and 2008.
The statement noted that the economy was in free fall at the start of 2009 with no apparent limit on how much worse things could get.
"Fear was widespread and confidence was scarce. Traditional measures of consumer and business confidence fell to stumpy levels not seen in decades. The anxiety stretched well into the mainstream."
The Minister, touching on "the mess inherited by the NDC government" said: "To address the deep and severe crisis inherited, first, the most immediate priority was to rescue the economy by ensuring macroeconomic stability, restoring confidence and breaking the vicious cycle of economic contraction necessitated by economic mismanagement, corruption, excessive spending, and lawlessness."
In answer to a question, Dr Duffuor said the government's objective of reducing the fiscal deficit over the medium term was feasible and critical to achieving private sector-led growth and reducing vulnerabilities in the economy.
He said the adjustment was crucial to maintain investor confidence, preserve macroeconomic stability and create scope for future countercyclical fiscal policy.
Dr Duffuor expressed optimism that although economic activity was expected to pick up in 2010, "our economic performance is expected to accelerate further over the medium term".
He said the measures taken so far for financial, economic and social reforms had contributed to economic stability and created the platform necessary for economic growth.
On inflation, the Minister said to a large extent, the implementation of policy measures since January 2009 had led to significant improvement in the economic environment.
He said currently, the inflationary pressures had eased.
Inflationary pressures intensified in the first half of 2009 reflecting the combined impact of a sharp depreciation of the Cedi and strong domestic demand from the fiscal stimulus in the preceding year.
From 18.1 per cent in December 2008, headline inflation peaked at a five year high of 20.74 per cent in June 2009.
However, during 2009, headline inflation declined steadily and ended the year at 15.97 per cent. Inflation in 2009 was driven by both food and non-food pressures but the pace of increase in the non-food sector was higher.
As implementation of prudent fiscal and monetary policies continued to take effect, headline inflation continued to decline this year, hitting a single digit at 9.52 per cent in June and trended down further to 9.44 percent in August 2010 and 9.38 per cent in September.
"This indicates that the dis-inflationary process is still on course. Today's release represents the 10th consecutive month of decline in the rate since it peaked at 20.7 per cent in June 2009. It is also the lowest rate recorded since June 1992", Dr Duffuor said.
The Minister said private sector responses to the macroeconomic policies and structural reforms had generally been positive over the past 14 months.
"Indeed, confidence in the country's economy is now strong. The Government recognizes that the risks associated with the macroeconomic imbalances in the country have the potential to seriously undermine our efforts to becoming a middle-income country by the year 2020."
The Minister said the Government was therefore "weeding out all wasteful and fruitless public spending", and enhancing government revenue through significant improvement in tax policy and tax administration.
Dr Duffuor said his vision for the medium term was to accelerate the growth of the economy without compromising macroeconomic stability that we are enjoying.
He, however, advised that with oil and gas discoveries made in recent years the transition to petroleum producing economy represented one of the most critical tests for the country's economic, social and political development since independence.
"Barring any adverse risk factors in the outlook for the rest of the year, we anticipate better growth prospects in the second half underscored by continued stability and gradual easing of credit conditions", Dr Duffuor said.
GNA