The World Bank says the government needs to adopt a multi-stakeholder approach and implement well-programmed development policy actions and multi-sector interventions to successfully transform the Ghanaian economy and boost labour market performance.
The World Bank has, therefore, recommended six strategic interventions to strengthen the Ghanaian economy and labour market, including identifying and nurturing economic activities and enterprises that could potentially increase product complexity and strengthen enterprises’ participation in global value chains.
These recommendations were contained in the fifth Ghana Economic Update report, launched on the topic “Structural Transformation and Labour Market Performance: Challenges and Opportunities” in Accra.
The Ghana Economic Update is part of a World Bank Advisory Services and Analytics series on Ghana’s economy. The report provides a snapshot of recent developments and medium-term prospects.
Every edition includes a broad overview of the country’s macroeconomic and structural dynamics, as well as a special topic, dedicated to a current policy issue.
Mpumelelo Nxumalo, an economic consultant at the World Bank Group, presenting the recommendations, said the government could also harness the potential of digital technologies as well as proactively adjust to the changing world of work and increase and enhance the participation of women, the youth, the poor and vulnerable in the labour market.
He said Ghana could improve its human capital in the current and future workforce and should design systems and interventions to be resilient and responsive enough to protect the economy and labour market from disasters and shocks.
Nxumalo said the COVID-19 crisis has substantially weakened Ghana’s growth outlook. Short-term prospects have deteriorated sharply, with significant uncertainty around the pace of the recovery in the medium term.
He said the severity of the crisis would depend on not only the actual spread and duration of the domestic outbreak but also the post-crisis growth path of the global economy.
The economic consultant said the short-term negative impact on Ghana’s economy will come through a decline in external demand, a decline in commodity prices, particularly of oil, and lower foreign direct investment and tourism receipts.
Kwabena Kwakye, an economist at the World Bank, said Ghana’s structural transformation and the labour market over the past three decades had supported strong and sustained economic growth, contributing to a substantial reduction of poverty and an increase in shared prosperity.
He said the country’s progress in poverty alleviation had been due primarily to structural transformation, increasing average productivity in some sectors and educational attainment among workers.
However, Nxumalo said, the pace of poverty reduction seems to have slowed in recent years and there has been a lack of growth-enhancing structural transformation in Ghana. Value-added activities and employment have shifted progressively from agriculture to industry and services, a pattern observed in many other countries.
“The shift toward industry has been driven by construction and mining, while the shift to services has been driven by trade,” he said.
He said the contribution of manufacturing to value-added goods, employment and exports has “declined over time and there were indications that Ghana had begun to deindustrialise prematurely”.
Public interventions across multiple sectors would require coherent and co-ordinated efforts between multiple government ministries and agencies, he said. It would also be crucial to secure effective private sector and civil society participation in the design, implementation and monitoring and evaluation of policies and interventions.
“A diverse set of interventions is needed,” he said.
Kwakye said that the interventions comprise support and incentives for international and domestic private investors to enter specific sectors, locations and value chains, as well as to develop and provide particular goods and services for the domestic and international markets in a labour-intensive and socially inclusive manner.
Incentives are also needed for private and public providers to develop skills of current and future workers which are valuable for employment, will increase productivity and will raise earnings. The skills range from vocational, technical, digital and business management skills to cognitive and socio-emotional skills.
On the macroeconomic outlook and risks, Ghana’s economic growth momentum is expected to dissipate, and inflation could breach the Bank of Ghana’s target of 8±% in 2020, but it is expected to remain within the target range in the medium term.
Pierre Laporte, the country director for the World Bank, reiterated the group’s commitment to supporting Ghana’s growth and development agenda towards economic transformation.
He commended the government for acting swiftly since the start of the COVID-19 pandemic to mitigate and contain its impact on the health and livelihood of Ghanaians.