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Aiming for Middle Income Country Status: What are the Growth Options?

Aiming for Middle Income Country Status: What are the Growth Options?. Xinshen Diao, Clemens Breisinger and James Thurlow November 16, 2007 Accra, Ghana. Outline. International experiences and challenges for Ghana on the way to MIC status Accelerated growth challenge

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Aiming for Middle Income Country Status: What are the Growth Options?

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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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