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Growth Strategies for Middle-Income Country Achievement

Explore growth options and challenges for Ghana to attain middle-income country status, focusing on agriculture, manufacturing, services, export diversification, and regional poverty reduction.

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Growth Strategies for Middle-Income Country Achievement

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  1. Aiming for Middle Income Country Status:What are the Growth Options? Xinshen Diao, Clemens Breisinger and James Thurlow November 16, 2007 Accra, Ghana

  2. Outline • International experiences and challenges for Ghana on the way to MIC status • Accelerated growth challenge • Structural change challenge • Export diversification challenge • Growth options for reaching MIC goal • Agriculture as a main driver • The role of manufacturing • The role of services • Divergence in regional income and poverty reduction Page 2

  3. Accelerated growth is needed, but required growth rates vary across countries Page 3

  4. Manufacturing or export-oriented services led structural change Page 4

  5. Rapid and diversified export growth required Page 5

  6. Growth options for Ghana to become a MIC Agriculture will remain the main driver • 40% of GDP currently • 5.7% of average annual growth rate over the last 6 years, higher than GDP growth rate • Agriculture will remain the most important contributor to MIC goal if its growth momentum can be maintained • Reaching CAADP’s 6.0% growth target can further enhance agriculture’s role in total growth Page 6

  7. Growth options for Ghana to become a MIC Manufacturing growth may play a limited role • Small initial size limits its influence to economy-wide growth even with very high growth • High dependency on agricultural inputs and hence on agricultural growth Services have strong growth linkages • Half private services are domestic market oriented and 50% larger than whole manufacturing • Through lowering transaction costs and increasing competition, service sector’s productivity and efficiency create growth outside services Page 7

  8. Factors affecting Ghana’s growth options • Need to prepare for possible shocks in world commodities prices, e.g., • Sudden decline in cocoa prices? • Sharp rise in food crop prices (maize and wheat) driven by bio-fuel development? • Changing climate and its effect on agriculture? • Oil discovery: blessing or curse? Changes in these external and internal conditions may alter Ghana’s growth options Page 8

  9. Linking growth to poverty reduction Page 9

  10. Poverty remains a challenge in North Page 10

  11. Balancing growth and poverty reduction in lagging region • Greater attention to agricultural activities benefiting a majority of Northern farmers: cereals and livestock • Development of high value commodities suitable for Northern savannah zone • Increasing trade with neighboring countries to open new opportunities in agricultural and non-agricultural sectors • Realization of potentials depend on infrastructure improvements and service provision Page 11

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