The review of Ghana’s economic outlook from stable to negative by Fitch Ratings should not be a cause for alarm, Economist Professor Eric Osei-Assibey has said.
According to him, the report by the international ratings agency is harsh, citing the issue of fiscal consolidation which Fitch Ratings described as slow, though in his view is rather the opposite.
Professor Osei-Assibey who is with the Economic Department of the University of Ghana told Joy Business since countries are recovering from the effects of covid-19, Fitch should have rather been moderate with its assessment of the Ghanaian economy.
“We all know where we are coming from after the pandemic which actually led to drastic fall in revenue and the ramp up in expenditure as a result of covid-19 related expenditures. This is not new to Ghana, it’s not something that is unique to Ghana; all over the world today countries are actually experiencing a very fast growth in fiscal deficits, largely because of the destructions caused by covid-19. And therefore for me, I don’t think it is cause for alarm, because obviously government need time to recover from this shock” he said.
Fitch Ratings said its revision of the country’s economic outlook to negative reflects the significant deterioration in public finances stemming from the covid-19 pandemic and the delays to the government’s fiscal consolidation efforts, which reduce Ghana’s ability to absorb further shocks for an extended period.
But Professor Osei-Assibey said “in my view, I think the report has been a little bit harsh on government, if you read it in its entirety it makes a point that government fiscal consolidation has slowed and for that reason the negative outlook. Of course they have done same to many many countries across the globe even including countries like UK and others which have experienced some downgrade. In my view given that this shock [covid-19 pandemic] is really very deep and really shook the entire foundation of the economy, countries need time to recover and not until the recovery is fully materialize, I do not think that fiscal consolidation is more important”.
“I think that government should still continue to use fiscal and monetary policies to support businesses until such a time we experience full recovery then it will begin to commit more resources to fiscally consolidate. And so the whole idea that the fiscal consolidation has slowed just at the time when we are recovering from this pandemic I do not think is a fair assessment of the situation.”
Fitch reviews Ghana’s economic outlook to negative, from stable but affirms ‘B’ ratings
Fitch said the revision of Ghana’s outlook to negative reflects the significant deterioration in public finances stemming from the Covid-19 pandemic and the delays to the government’s fiscal consolidation efforts, which reduce Ghana’s ability to absorb further shocks for an extended period.
It also said the ‘B’ rating reflects the high public debt level and low revenue base, which mean that Ghana’s debt affordability metrics will remain markedly weaker than rating peers over the rating horizon.
It noted that this is balanced against Fitch’s expectation of a recovery in economic performance and a stabilisation of debt/GDP and the ready availability of external and domestic financing.