GDP GROWTH AND PEOPLE’S DAILY BREAD

The economists call it gross domestic product (or GDP). In simple language, it is the final value of the goods and services produced in a country in any given year. Thus, if roads are constructed so that people have improved access to transportation services, it adds to our GDP. If our cocoa farmers increase production so that, we earn more revenue from cocoa sales and export, that also adds to our GDP. And should a businessman put up a factory to produce toys for the entertainment of toddlers, that one too contributes to our GDP. Again, if government extends health delivery to any section of the populace by training and paying more health personnel, it contributes to our GDP. Even if a carpenter produces a small table that could be used for some purpose, that carpenter has, in his own small way, contributed to our GDP. Simply, any activity that produces something of value or that adds value to what we already have adds to our GDP. That is why, as for me, I always refer to the growth of our GDP as the expansion of our economy. And I am right, because if a country’s GDP is growing, it means that country’s economy is expanding.

Job Creation

It is the desire of every nation to create jobs for its people. Job creation is a way of getting people to participate in the work of providing needed services or converting our natural resources into needed commodities for domestic consumption or export. In short, job creation allows people to participate in wealth creation. In return, the workers who do the jobs get paid with part of the wealth they helped create. That is how workers get money to buy their daily bread. So, if somebody puts up a factory to produce gari and employs some people to help in the production, that somebody is creating jobs. Or if somebody sets up a structure to deliver some communication service and employs some senior secondary school graduate or graduates to oversee it, that is also job creation. Or if a farmer chooses to expand his or her farm and, in the process, employs more by-day people, that too is job creation. It is clear that for more jobs to be created, the existing economic activities have to be expanded. Put in another way, for jobs to be created, our GDP must be growing. In fact, for the people in a country to have access to improved health, educational and other services, and also to be able to get the kind of commodities and material things they need, the GDP of that country must be growing.

GDP Growth Rate

Obviously, in a country like Ghana, it is even not enough for our GDP to be just growing. It has to grow quite quickly. I mean, economic activities have to be generated quickly so that more and more unemployed people can get jobs to do in their life-time and have improved access to the services and things they need. GDP growth rate tells us how quickly or slowly our GDP is growing; or how quickly or slowly economic activities are being created. If economic activities are being created quickly, the GDP growth rate would be high. If economic activities are being created only little by little, then the GDP growth rate would be low. That is why anytime the national budget statement is read, the first thing I ask is, what was our GDP growth rate? I ask that question because it is the GDP growth rate that tells us whether more economic activities were generated or whether more jobs were created to give people their daily bread, and how quickly that is happening.

How we have fared

The table below gives the GDP growth rates recorded in the last ten years. It gives us some idea of how we have been creating more economic activities or how we have been expanding our economy over the period.
 Year       GDP Growth Rate
1996       4.6 %
1997       4.2 %
1998       4.7 %
1999       4.4 %
2000       3.7 %
2001       4.2 %
2002       4.5 %
2003       5.2 %
2004       5.6 %
2005       5.9 %
2006       6.2 %
Source: Ghana Statistical Service (05/02/07)
* Last three values provisional.

As the table shows, from 1996, that is, the four years preceding January 2001, our economic growth slowed down until it declined to a low 3.7% at the close of December 2000. And then from January 2001, it started picking up year after year. It can be seen that by close of December 2006, we had recorded a relatively impressive growth rate of 6.2%, which is one of the highest growth rates recorded in the history of the country. I think we can be proud of this as a people.

Indications

Indication of this growth can be found in the increase in the production of, for example, cocoa. Production volumes increased from 601 922 metric tonnes in the 2005 to 740 458 metric tonnes in 2006, that is, 23% increase. Cement production in the first eight months of 2006 was 1 349 644 tonnes, an increase of 5.7% over the cement output of 1 276 571 tonnes over the same period in 2005. This further reflects growth in construction activities. And taking the Daily Graphic alone, 6788 new job vacancies were advertised compared with 6033 vacancies during the same period in 2005, representing an increase of 12.5%.

The way forward

The way forward is to continue being on track. Let all hands be on deck. This year, we have set ourselves a GDP growth target of 6.5%. As government creates the enabling environment, let us venture into productive activities and make this target happen. We can even exceed it. Let’s spend our resources on the right things. If we maintain our current focus and momentum, and build on what we have achieved, I don’t see why we would not make it as a nation.

Kwaku Kwarteng
Government Spokesperson, Finance & Economy