Intentional reforms needed to escape ‘middle-income trap’ — panellists
PANELLISTS at a forum to launch a new World Bank Report in Accra have called for more intentional reforms to attract strategic investments and drive structural transformation of the country’s economy.
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Being intentional, they said, should involve strategic increase in investments into key sectors of the economy such as manufacturing, improved agriculture, tourism, technology, infrastructure (roads) and value-added exports to help Ghana escape the ‘middle-income trap’ most developing countries often found themselves in.
The panellists maintained that the intentional reforms must be backed with a comprehensive long term development policy that would be binding on all successive governments to help the country navigate obstacles that could hinder its efforts to reach high-income status.
They said instead of progressing after attaining middle income level, the country was rather experiencing regression in transformation due to excessive raw material exports and over-concentration of the economy on a few raw materials.
The stakeholders who took turns to express their concerns in a panel discussion included Deputy Governor of the Bank of Ghana (BoG), Dr Maxwell Opoku-Afari; Director of the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey; President and Chief Executive Officer (CEO) of the Africa Centre for Economic Transformation (ACET), Mavis Owusu-Gyamfi; United Nations (UN) Resident Coordinator, Charles Abani, and the Swiss Ambassador to Ghana, Simone Giger.
It was at the launch of a new World Bank Report dubbed: “World Development Report 2024: The Middle-Income Trap” in Accra last Thursday.
Intentional approach
Dr Opoku-Afari said there was the need for a more intentional approach to investments in key sectors as part of measures to transform the country’s economic structure.
“I think the key issue with regard to Ghana is about investment inflows in strategic sectors of the economy. There is the need for a more targeted and transformative investment agenda.
“We need to do more to ensure that these investments change the structure of the economy. And so, we need economic growth that would be built on solid, sustainable foundations rather than short-term fiscal adjustments,” he said.
Key areas
Even at the rate of growth, Prof. Quartey said it would take the country 26 years to break from the low middle-income status to upper or higher middle-income level.
He said that was the main reason that the government must be intentional to pursue policies to support investment in key areas of the economy.
“One thing we lack now is transforming from rain fed agriculture to irrigation, value addition, exports of processed raw materials and training of skilled manpower.
“We need to investment in Science, technology, engineering, and mathematics (STEM) to skilled personnel for our industries to become productive and efficient,” he said.
Report findings
The Chief Economist of the World Bank Group and Senior Vice-President for Development Economics, Indermit Gill, who shared findings of the report, stated that more than 100 countries were faced with serious obstacles that could hinder their efforts to become high-income countries in the next few decades.
Drawing on lessons of the past 50 years, the report established that as countries grow wealthier, they usually hit a “trap” at about 10 per cent of annual United States gross domestic product (GDP) per person — the equivalent of $8,000 today.
That’s in the middle of the range of what the World Bank classifies as “middle-income” countries.
Since 1990, only 34 middle-income economies have managed to shift to high-income status—and more than a third of them were either beneficiaries of integration into the European Union or of previously undiscovered oil states.
Mr Gill said many of the countries relied on outmoded strategies to become advanced economies. They depend just on investment for too long — or they switch prematurely to innovation.