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Ghana Says, Hey, Guess What? We’re Not Poor Anymore!
November 5, 2010
That’s right. Ghana announced today that its GDP isn’t actually $15.7 billion, but rather $25.6 billion. This sudden 63% jump occurred not because of a sudden oil find (the oil doesn’t arrive until next month), but rather because of a technical rebasing of the way GDP is calculated. Turns out that services like telecoms are a lot bigger than everyone believed yesterday. Here are a few of my quick reactions:
- Congratulations! It’s always great news to hear that you may be doing even better than you thought. Ghana has long aspired to be a middle-income country by 2020, and this now seems like it will happen many years early. Accra certainly feels like a middle-income city.
- Boy, we really don’t know anything. Over the past thirty years Ghana has been one of the most scrutinized, measured, studied, picked-over economies in Africa. (yes, I too did my PhD on Ghana…) Yet, we were all taking as gospel a number that was off by a tremendous margin. If we are nearly two-thirds wrong on Ghana’s GDP, what hope can we possibly have in stats for Chad? Everyone knows that data is dubious, but this seems to add a whole new level of doubt.
- Ghana’s indicators are going to all change. If GDP is 63% larger than we thought, the denominators for a lot of ratios are also way off. This is perhaps both good and bad. Since debt/GDP drops from 32% to 19%, this will bolster the government’s case that it can borrow lots more from international capital markets. But it also means that government revenues, which was thought to be a healthy 20% of GDP or more is probably really closer to 12%.
- I’m still confused… but it probably doesn’t matter. The Reuters article quotes the government statistician as estimating GDP per capita at $1318 instead of $753. This doesn’t add up to the total GDP figures also given since this implies a 75% increase. If the $1318 is correct, then that either implies that the government thinks there are only 19.4 million people instead of the normal estimates of about 24 million. Or, if the total GDP number of $25.6 billion is right, then per capita GDP is really $1067 per capita. (I think I’m already violating my lesson from #2.)
- Ghana will graduate from IDA sooner than we thought. Whatever the exact figure, it’s clear that Ghana will graduate from the World Bank soft-loan window very soon. The eligibility threshold is currently $1165.
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2 Responses to “Ghana Says, Hey, Guess What? We’re Not Poor Anymore!”
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November 6th, 2010 at 2:05 pm
Todd,
Great post on what may be an emerging issue if other countries review their data too.
What does it mean for global prosperity and global poverty reduction?
We’ve, as you know, been number crunching here and pointing out there’s a new bottom billion – 960m or three-quarters of the world’s poor now live in MICs: http://bit.ly/bKLJYU
About 30% of Ghana’s population live under $1.25 poverty measure (data for 2006) so using the WDI population data for the same year (22.4m) Ghana’s transition adds another 7m more absolute poor people now living the MICs group.
Here’s the world bank’s data on poverty in Ghana:
7.4m (1989) – presumably at $1/day measure as it’s 1989
6.7m (2006) – $1.25/day measure
Not so impressive for a middle income country?
All of this leaves me confused too – why are so many countries achieving MIC status with such large numbers of poor people…?
And what does it mean for doing better on the quality of growth, the quality of ODA, etc, etc.
The large rise in Ghana’s inequality (gini measure) might begin to give some answers and means over time growth will become less and less effective too (given the mathematical relationship between poverty, inequality and growth growth reduces poverty more when the income distribution is more favourable).
Ghana’s gini (inequality measure):
36.0 (1989)
42.8 (2006)
Maybe demographics is part of this debate too?
And what role does the international community have in drawing attention to inequality in a MIC anyway – sounds like a domestic political issue?
What do you think?
Andy Sumner
Fellow, Institute of Development Studies
twitter.com/andypsumner
November 7th, 2010 at 10:57 pm
Having a more realistic GDP number is always good. But two reactions:
- This in no way changes fiscal sustainability – or how much a government can borrow. How can it? After all, fiscal sustainability reflects teh ability to repay and withstand adverse developments. Taxes in local currency terms are not changing because GDP is redenominated – so how is the ability to repay changed?