The Institute after reviewing the state of the economy and the 2017 budget submitted that the prospects in the remaining half of the year look promising.  “The overall real GDP growth of 6.3 per cent projected for 2017, reflecting largely increased production of crude oil, is encouraging,” IFS Executive Director Professor Newman Kusi told the press on Thursday.

"Nevertheless, the IFS finds the rate of growth of non-oil GDP very disappointing. This unfortunate development is partly due to the government’s spending retrenchment.” He said the cutback in government spending had severely hit expenditure on goods and services, capital expenditure and arrears payment.

He said the size of the expenditure cut was GHC3.6 billion during the first four months of the year.  Prof Kusi said cutting back capital spending and not paying valid arrears hold back economic activity with serious consequences for domestic revenue mobilisation.

 The IFS observation in its review of the 2017 Budget that the projected revenue increase of 33.5 per cent was on the high side, given the slower projected nominal GDP growth and wide range of tax reliefs being granted, has been proved right.

It said from developments so far, it was obvious that the projected revenue for the year would be difficult to achieve in 2017 unless new measures were introduced to grow the non-oil economy and enhance revenue administration. Prof Kusi also said the shortfall in revenue seriously constrained government expenditure during the first half of the year that included spending on critical capital projects, payments to statutory funds and clearance of arrears.

 “Adherence to the deficit target seems to have become an overriding goal of the government,” he said.  “While we recognise government’s efforts to stay within the projected deficit, the danger is that the much-depressed spending could seriously constrain economic growth and job creation, and thus domestic revenue mobilisation.”

Dr John Kwakye, Director of Research at IFS, noted that measures introduced by the government would make significant impact on the economy in the second part of the year but economic managers ought to address the implementation challenges.