Dr Ernest Addison says the country needs to work hard to manage the growing deficit as the current rate is not sustainable.
“I think we need to do some work in trying to revisit the mobilisation of revenue from our domestic resources and use that to manage the growing budget deficit,” Addison said.
The deficit hit 3.4% of GDP in the first quarter of this year, against a target of 1.04%.
Speaking to the Daily Graphic Online, Dr Addison said, “We cannot allow the COVID-19 pandemic to undermine all the gains we have made over the past three years.”
He said reforms over the past three years had helped to stabilise the economy, boost growth and curb inflation, but this was being threatened by the pandemic.
“We are projecting to see gross domestic product (GDP) growth declined from an original estimate of over 7% to 2%. It is a significant revision of the growth outlook,” Dr Addison said.
“It will take some time for the economy to get back to pre-COVID growth. The worst-case scenario, which we are not expecting, is three years of negative growth,” he told the audience for the discussion on 25 June, which was live-streamed by Graphic Online.
“Over the past three years we have tried to stabilise the economy and made a lot of progress from slow growth an unstable exchange rates,” he added.
The government and the BoG have taken steps, including the purchase of government securities, to cushion the impact of the pandemic.
Inflation
The bank’s Monetary Policy Committee will meet in July and assess the impact of current measures. Addison said it would take further action if necessary.
Inflation, at 0.6% in April and 11.3% in May, is above the targeted range of 8%, plus or minus 2%. But Addison said that, given the current circumstances, the bank would see how inflation progresses over the next quarter before deciding whether monetary tightening was needed:
“We believe that inflation will come back to our target range before the end of the year, and there might not be a need to tighten policy in the second half of the year.”
