The question now is not whether we are in a recession – yes we are. The most useful questions to ask are:
- How long will this last?
- To what extent would the effects be?
- Which group would feel the impact most?
- How swift will the recovery be?
Interestingly, we shall all have an eye opener in times like this to appreciate the concepts of economics in our daily lives. The COVID-19 was first detected in China in later part of 2019 and has spread rapidly to other countries, infecting more than 2 million and killing more than 170 thousand representing about 7% of the total infections. Details of statistics of covid-19 for some countries below;
The statistics above depict the seriousness and rate at which the virus spread. This notwithstanding, has created economic confusion between various leaders of countries whether developed or developing. Some academicians even argue that this has brought the world to a level playing ground where sophisticated machines and wealth of nations and individuals are not recognized any more.
In such pandemic of a sort, it’s believed to die out after some periods of time usually three months in a particular country. But such argument in a way is defeated by the experience of China who is still battling the case with new infections during the time all thought they have managed to bring the situation under control. This has made it very difficult for various economic leaders of various countries to plan. The hardest hit in this scenario is developing countries who have data on only people who can vote to elect their leaders into positions but no accurate data on economic foundations of various individuals, organizations’, small and medium scale enterprises, companies and corporations.
Therefore, in an attempt to introduce policies to alleviate the economic hardships of the aforementioned groups, such policies are greeted with strong critics because any policy not backed by statistical data and research do not achieve it intended purposes. In Ghana for instance, the government has no clue of the number of people who really need these support thereby implementing fantastic policy during this period but the main targeted group of people can’t be identified. And out of greed, people in position who have to implement it are seen rather fighting over these items and people who ordinarily would not need these support are given.
How long would these pandemic last is not known, but what most leaders dwell on much is speculations and previous experience of pandemics. It therefore become very difficult for individuals, groups, small and medium enterprise, corporations, organizations and companies let alone various presidents, financial and economic wizards to plan to manage the effects after the pandemic.
In a global pandemic like this, none is speared in terms of effects but the hardest hit would be would be those that have no or little plan for emergencies like this. In 2019 budget statements, 53million Ghana Cedis was earmarked for emergencies like this but no amount was stipulated as emergency for 2020 budget statement. What question or questions come into mind, many but few we can ask for the purposes of our argument are:
- Is our economy robust as we are made to believe after every budget statement?
- Do we need a National Plan which addresses our fundamental problems rather than party manifestoes?
- Do all believe that governance should not be left in the hands of the only ruling party alone particularly in Africa?
- Governments in Africa dwell on policies and plans for the next election but not development of the country?
This is the life on ordinary Ghanaian before the lockdown.
A robust economy can withstand external shocks and pressure if not for the long term but short term and sometimes medium term periods depending on the type of shock. We are told as a country after every budget that we have external reserve of not less three months cover. I don’t want to go into the economic jargons but question ordinary Ghanaian is asking is, “WHERE IS THAT RESERVE” that as a country we couldn’t even cater for ourselves for even two weeks. Two weeks in a sense that, when the president announced $100million USD package to combat covid-19, the next thing we heard was the finance minister praying to parliament to grant him a medium to get a facility equivalent to $100million USD from IMF. After this pandemic, every Ghanaian must understand that since we are not developed like Japan, UK, America we must partly involve ourselves in national building if not these politicians would disappoint us all. What surprises most of us is the way and manner people who can speak to make a change have all kept quiet just to leave the ordinary Ghanaian to his fate.
Do not show your love in times like this only by sharing money, Verica bucket and food items but if you had added your BIG VOICE to effect that change in national development may be we wouldn’t have been in this situation.
Our health sector is nonetheless largely hit among all the sectors and has exposed our inability to put our hospitals in good shape to handle such situations. It’s now clear that if covid-19 had started in Africa all our leaders would have left to Dubai, Germany, Italy to mention but a few. Despite the government in power, we should press on them to deliver good policies for our development and not a few. Our health facilities have been exposed big time and we look forward to any government that would continue after 2020 should take the country and its citizens serious by equipping all our health facilities so that all government appointees attend the same healthcare with us since there is no VIP health care during covid-19.
Since it’s very easy to use the name Ghana and it resources for loans they easily contract loans for consumption instead of investment that can pay for itself. If you look at the journey through which all developed countries used and you don’t restrain yourself in Ghana, you may be tempted use unpalatable words for our leaders and elders. Anytime you are growing up as a young man from a well cultured environment, your elders’ would advise you never to go for loans to start a life. As my financial expert friend would say you must know the investment opportunity and its accuracy before going for a loan. But our national leaders defy this common financial advice to borrow from any source for consumption but not investment projects which include hospitals. We shall soon compile the value of all loans contracted by various governments and the projects they have done with them.
The most vulnerable in such situations under consideration are those who depend on others daily to survive. Have you thought of the street beggars whom you always give a token in traffic? Such group consist of children, the sick or the disable, the aged and the unemployed. A country whose leaders’ attention is always focused on the next election before every policy is implemented has a long way to go. Radio monitors and serial callers of various political parties, how are you and your family, friends and sympathizers’ in this lockdown? Must you continue to defend everything your party does or says after the lockdown? We must all understand that money is not everything and so if you are rich alone in community, one vulnerable person can’t stay at home during this period because of hunger but to contract the virus to affect your family.
Besides, every business thrive well on how buoyant and fluid the economy is in terms of availability of money in peoples’ pocket that drive demand for goods and services. During this period, the most important thing people need is food and for that matter all those who produce other goods and services unrelated to food are really sinking. People will now have to work for some period of time usually months to years after the pandemic before becoming stable financially in other to shift demand from food items to non-food items. In conclusion, demand for all goods and services would start from zero before reaching the level of production or service you were before this pandemic. Nonetheless, some businesses would have brighter start than others keep in mind but would all depend on the kind of service or goods you offer to the people whether it’s a necessity or a need. This how the business of the ordinary Ghanaian on the street now look like:
Besides, the academic performance of students shouldn’t be expected to be the same after this period but to decline rather than doing better. The academic calendar is already off gear and the rate of covering one lesson after the other would slowed thereby affecting students taking external exams like BECE and WASSCE unless students who do serious home studies and the gifted ones.
In addition, the financial the institutions would not be left out of this equation. One reality we should embrace is that the available financial institutions are stronger than before the financial institutions clean up. They now have the financial muscle to withstand the pressure of withdrawing during this period for months without folding up. However, loans are not paid because there is no business in the country which put them in an obscure corner very difficult to withstand but what we say is that the central bank should do a comprehensive monitoring of all financial institutions to come to the aid of those who become distress in time like this at managerial level before it spikes tension and panic withdrawal in the system.
Economic recession is a period in a business cycle where there is contraction and a general decline of economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale natural or anthropogenic disaster (e.g. a pandemic). In the United States, it is defined as “a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”. In the United Kingdom, it is defined as a negative economic growth for two consecutive quarters.
What does the above jargons and explanations tell you? We are already in the recession and every economy do not wish to come to this point of her development cycle where demand and supply come to a halt. Since economic development is a process, such a situation is therefore unavoidable in our quest to be among the developed economies. How quickly to get out of this situation after the pandemic depends largely depends on how strong and robust our economy is before this outbreak and plans to roll out to mitigate or curtail the impact of the recession.
Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time. Government policy whether through changes in spending or taxes, shifts the aggregate demand outward in the case of expansionary fiscal policy and inward in the case of contractionary fiscal policy. We know from the chapter on economic growth that over time the quantity and quality of our resources grow as the population and thus the labor force get larger, as businesses invest in new capital, and as technology improves. The result of this is regular shifts to the right of the aggregate supply curves to my fellow students of the theories.
Monetary Policy and Bank Regulation shows us that a central bank can use its powers over the banking system to engage in countercyclical—or “against the business cycle”—actions. If recession threatens, the central bank uses an expansionary monetary policy to increase the money supply, increase the quantity of loans, reduce interest rates, and shift aggregate demand to the right. If inflation threatens, the central bank uses contractionary monetary policy to reduce the money supply, reduce the quantity of loans, raise interest rates, and shift aggregate demand to the left. Fiscal policy is another macroeconomic policy tool for adjusting aggregate demand by using either government spending or taxation policy.
(Source: Martin, Fernando M. “Fiscal Policy in the Great Recession and Lessons from the Past.” Federal Reserve Bank of St. Louis: Economic Synopses. no. 1 (2012). http://research.stlouisfed.org/publications/es/12/ES_2012-01-06.pdf.)
What the above theories explain that the government has two main tools address recession periods in the economic development cycle of a country. And these are fiscal policy by the central government and monetary policy by the central bank of Ghana. The main question is how the government would implore these policies in diverse ways to help the Ghanaian economy back on track in earnest after the pandemic. These depend largely on the kind of investment expenditures government undertakes and it commitment. Our ability to restore our economic growth of 6-8% of GDP per anum cannot be done without the full support of the citizenry in hard work towards economic recovery.
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By: Bernard Kwadwo Afful (Student and a writer)