Accra, Ghana//-A study released by World Bank today warned that Ghana can only return to its agenda of growth-enhancing structural transformation if its main external markets are able to halt the spread of the coronavirus pandemic in the country.
According to Kwame Gyan Kwakye and David Elmaleh, both economists at the World Bank Ghana office, the success of the ongoing COVID-19 vaccination programme embarked upon by the government would help speedy up the recovery of the country’s economy.
But they warned that the country’s recovery would be subdued if the rest of world does not accelerate their vaccination exercises.
Evidence from household and enterprise surveys administered in May–June 2020 suggests that the COVID-19 pandemic has had widespread negative effects in Ghana.
The surveys asked both households and enterprises to report any changes to their economic status since March 2020, when the government began to introduce measures to control the local spread of the virus.
Most households reported a loss of income; this was especially true of households that received self-employment income, remittance income, or private transfers.
The decline in remittance income and private transfers was presumably due to the loss of labour income by the benefactor.
But only about one-quarter of households indicated that they were severely affected by business failure or loss of employment.
Most enterprises reported a loss in revenue due to decreased sales, and a sizeable percentage reported an increase in the cost of production due to higher prices for inputs. As a coping response, affected enterprises have tended to reduce worker pay and hours rather than laying off workers.
Enterprises indicated they would prefer assistance mainly in the form of cash transfers, deferrals of rental payments, and loans with subsidized interest rates.
However, the percentage of enterprises and households that received any formal assistance was in the single digits.
Speaking at the virtual launch of the study titled-‘Structural Transformation and Labor Market Performance in Ghana’, Kwakye added: “For Ghana to successfully transform its economy and boost its labour market performance will require a steadfast, multi-angled perspective, well-programmed development policy actions at both the macro and micro levels, and multisector interventions”.
Structural transformation
The study refers to structural transformation as the reallocation of economic activity between agriculture, industry and services, which occurs with modern economic growth and development.
Such structural transformation can spur economic growth and development if it increases overall productivity growth, as occurred with the onset of the Industrial Revolution, or as part of the “East Asian Miracle.”
The study examines Ghana’s record of structural transformation through an analysis of the contribution of various sectors to value-added (gross domestic product, or GDP) and employment; the country’s degree of economic diversification as reflected by the complexity of its products and exports; and the country’s human capital and labour productivity, along with the contribution of labour productivity to economic growth.
As with many other countries, the sectoral distribution of value-added and employment in Ghana has progressively shifted from agriculture to industry and services.
The shift to the industrial sector has been driven by shifts to construction and mining subsectors, whereas the shift to the services sector has been driven by a shift to trade services subsector. The contribution of manufacturing to value-added, employment and exports has declined over time.
Recommendations
“Design systems and interventions to be resilient and responsive, to protect the economy and labour market against any potential disasters and shocks.
Interventions at the macro and micro levels, and across multiple sectors, will require a series of coherent and coordinated efforts across multiple government ministries and agencies”, the study recommended.
It will also be crucial to secure effective private sector and civil society participation in the design, implementation, and monitoring and evaluation of policies and interventions. The types of interventions needed are diverse.
They comprise inputs and incentives (including favorable rules and regulations) for international and domestic private investors to enter into specific sectors, locations, and value chains, and to develop and provide specific goods and services for domestic and international markets in a labour-intensive and socially inclusive manner.
Also, inputs and incentives are also needed for private and public providers to develop the skills of current and future workers that are valuable for employment, productivity, and earnings, from vocational and technical, digital, and business management skills to cognitive and socioemotional skills.
Interventions also need to go beyond skills development to address the myriad, other potential constraints to productive, gainful private wage and self-employment, related to knowledge, technology, labour, land and property, physical and financial capital, networks, and market-entry support.
Efforts are also needed to create a wide-reaching, robust and flexible social protection system, which is sufficiently delinked from formal employment or organizational arrangements, and which effectively addresses the main risks faced by households, workers, and enterprises.
Robust relief and recovery measures for households, workers, and enterprises are needed to inject liquidity to protect and restore consumption and investment to address the crisis created by the COVID-19 pandemic.
African Eye Report
