An economic analyst at Databank, Courage Kingsley Martey has stated that the absence of a broad-based economic system is to blame for the economic shocks the country experiences periodically.
Mr Martey said the overreliance on Ghana’s main commodities – gold, oil and cocoa does not bode well for the economy.
He explained that the country’s limited sources of foreign exchange earnings means that the economy is negatively affected during commodity price shocks.
“Ghana experienced this economic shock because we do not have a broad-based economic system.
The limited sources of foreign exchange income means that whenever our main export commodities experience price shocks, it leads to a depreciation of the cedi because foreign exchange earnings are adversely affected by the lower prices. This then trickles down to the economy, affecting various sectors,” he said.
Mr Martey highlighted the need for a product and market diversification to cushion the country’s economy. The economic analyst suggested that the country adopt practices posited by the representative demand theory.
The theory states that the more similar the demand structures of countries, the more likely they will trade with one another. Mr Martey believes that ability to satisfy local demand would adequately equip businesses and manufacturers to compete in the export market. .
“Local producers stand to benefit a great deal if they meet domestic demand while improving their products and services to meet international standards. This would position them well for the export market and ensure they become highly competitive. A coherence in fiscal and monetary policies is also required in order to institutionalize low interest rates so as to lower the cost of capital for businesses and enhance their competitive profile in international trade.
“We should execute more sub-regional trades like the Europeans and East Africans tend do. Nigeria for instance, has a huge market and a high demand for salt mainly due to oil exploration. Therefore, Ghana can begin to harness its salt deposits for the local crude industry. After gaining much experience and economies of scale, the country can leverage on its relationship with Nigeria to supply the country with salt,” he said.
Ghana’s real estate is one of the sectors of the economy that suffers as a result of the cedi depreciation. According to the Ghana Real Estate Developers Association, an estimated 70 percent of input material is imported.
The Managing Director of Lamudi Ghana, Akua Nyame-Mensah reiterated the point made earlier by Mr Martey, calling on stakeholders in the country to focus more on local goods to stimulate the economy.
“The country needs to focus its attention on increasing local and regional production. Such a move will have a positive impact on the pricing of all products, including those that are imported.
“An import focused market creates imbalances in the economy, and we can see how it has increased the price of real estate inputs for instance,” she said.
