Answer to Question #312669 in Management for Derrick

Question

(1) Ghana recorded its first Covid-19 case in March, 2020. The outbreak of the Covid-19

Pandemic in Ghana has affected the various sectors of the Ghanaian economy in many ways.

The Government of Ghana has requested the businesses in the industry your business

operates to submit a business plan for financial support.

2. explain five (5) impediments that may prevent Ghanaian entrepreneurs from contributing to

the development of the Ghanaian after the Covid-19 Pandemic.

3. Explain five (5) dimensions of entrepreneurial networks.

4. Explain five (5) effects of the monetary policy rate of 14.5 percent on businesses in Ghana

under this Covid-19 period.

Answer 1

Ghana’s rapid growth was halted by the COVID-19 pandemic, the March 2020 lockdown, and a sharp decline in commodity exports. The economy had grown at an average of 7 percent in 2017-19, before experiencing a sharp contraction in the second and third quarters of 2020.

The economic slowdown had a considerable impact on households. The poverty rate is estimated to have slightly increased from 25 percent in 2019 to 25.5 percent in 2020.

The overall fiscal deficit doubled to 15.2 percent in 2020. Public debt increased to 81.1 percent of GDP in 2020, placing Ghana at a significant risk of debt distress. Growth firmed up further in first and second quarters 2021 despite a sharp contraction in mining and the pandemic’s second wave.

Provisional fiscal data for first half of 2021 suggest that the authorities cut spending to make up for revenue shortfalls. The overall fiscal deficit was 5.1 percent of GDP.

Headline inflation remained relatively low at 7.8 percent in June 2021, as the pandemic-induced food price shock eased, prompting the Bank of Ghana to reduce the policy rate by 100 basis points to 13.5 percent in May to support the recovery. However, inflation inched up 9.7 percent in August due to higher food and non-food inflation.

Fueled by the domestic recovery, imports expanded faster than exports in early 2021 while external demand for commodities remained subdued. As a result, the current account deficit widened from 0.8 percent of GDP in 2021’s second quarter to 1.3 percent of GDP in 2021’s second quarter. 

Outlook

Ghana’s economy is projected to recover gradually over the medium term, thanks to commodity price growth and strong domestic demand. Ghana received $1 billion equivalent in the recent IMF SDRs allocation, part of which will go to support economic recovery. Growth is expected to average 5.1 percent yearly in 2021-23. After declining by 1.7 percent in 2020, real per capita GDP is projected to return to its pre-COVID-19 level in 2021.

The fiscal deficit is expected to remain high as the government implements its economic support program. It is projected to narrow to 14 percent of GDP in 2021 and 9.5 percent by 2023 - still above Ghana’s 5 percent ceiling.