Accra, Feb. 24, GNA - In spite of several challenges the 2004 budget faced, the economy performed well because it was prudently managed, the Minister of Finance and Economic Planning Mr Kwadwo Baah-Wiredu said on Thursday.

"Indeed, all the key economic indicators show that the economy remained resilient in 2004," he said in his budget statement to Parliament.

He said the provisional out-turn indicates that Real GDP grew at 5.8 percent, exceeding the projected growth of 5.2 percent, year-on-year inflation declined to 11.8 percent at end-December, 2004, marginally over the target but well below the 23.6 percent at end-December 2003; average inflation declined from 26.7 percent in 2003 to 12.6 percent in 2004 and the cedi remained relatively stable throughout the year - depreciating by a moderate 2.2 percent against the US dollar.

Mr Baah-Wiredu said domestic primary balance registered a surplus equivalent to 0.7 percent of GDP, while the overall budget was in a deficit equal to 3.2 percent of GDP; net domestic financing of the budget was higher than programmed at A2393 billion (equivalent to 0.5 percent of GDP) against the target of a net repayment of A21,732 billion (equivalent to 2.2 percent of GDP) and gross official foreign reserves were the equivalent to 3.8 months of imports, at the end of December 2004, against the target of 3.0 months of imports;

He said interest rates generally declined and stabilised, with the benchmark 91-day Treasury bill rate falling slightly from 18.7 percent at the end of 2003 to about 17.0 percent; total revenues exceeded expectations in 2004 as a result of measures taken to improve efficiency in administration; and total expenditures exceeded projections mainly on account of transfers to fund petroleum price subsidies and capital outlays financed by higher-than-expected disbursement of external inflows including HIPC debt relief.

Mr Baah-Wiredu said the implementation of the 2004 Budget was beset by a number of difficulties. These included the persistent volatile increases in world crude oil prices, which necessitated the transfer of resources earmarked for social and development programmes to the procurement of crude oil.

He said the huge transfer of resources to the Tema Oil Refinery to subsidise the prices of petroleum products in order to prevent financial bleeding at TOR resulting from the under-recovery in the ex-refinery prices of petroleum products was another problem.

Mr Baah-Wiredu said the provisional outturn indicates that GDP recorded a growth rate of 5.8 percent in 2004, exceeding both the projection for the year and the 2003 outcome by 0.6 percentage points. The Agricultural Sector led the way with an outstanding growth performance of 7.5 percent against the growth rate of 6.1 percent achieved in 2003, with the Industrial and Services Sectors registering growth performances of 5.1 percent and 4.7 percent, respectively, or at the same pace as last year.

In terms of the relative importance of the sectors to the overall growth, agriculture contributed 46.7 percent, up from the 41.4 percent in 2003. This surge in agriculture led by the cocoa sub-sector reduced the relative contributions of all other sectors.

Industry and Services contributed 22.1 percent and 24.3 percent, down from 24.0 percent and 26.7 percent, recorded in 2003 respectively. The residual contributions of 7.8 percent and 6.8 percent to growth in 2003 and 2004, respectively, are attributable to Net Indirect Taxes. Mr Baah-Wiredu said the reported growth in the Agriculture Sector was propelled by the strong continued performance of the cocoa sub-sector.

The growth of 29.9 percent of the cocoa sub-sector (the equivalent of 17.9 percent contribution to total GDP growth) was a further improvement on the 16.4 percent growth realised in 2003 (equivalent to 9.8 percent contribution to total growth).

The mass spraying exercise and better husbandry practices initiated by the Government in 2001 continue to have a positive impact on cocoa production.

The Minister said growth in the forestry and logging sub-sector slowed down in 2004,while that of the crops and livestock sub-sector mirrored the 2003 performance of 5.3 percent.

The growth in the fishery sub-sector was 3.5 percent, which represented a marked improvement over the performance in 2003. On industry, Mr Baah-Wiredu noted that the construction sub-sector was the highest performer under industry, registering 6.6 percent growth as against 6.1 percent in 2003.

This showed a consistent increase in growth in the construction industry over the last three years.

The growth in construction was boosted by road infrastructure development during the year.

The manufacturing sub-sector's growth rate of 4.6 percent was similar to the performance in 2003. Growth in Mining and Quarrying, and Electricity and Water sub-sectors, however, decelerated relative to the 2003.

He said the contribution to overall GDP growth by all the sub-sectors in Industry in 2004 fell short of 2003 effort. The shortfall in the construction sub-sector was, however, only marginal. On services, Mr Baah-Wiredu said growth performances of the various sub-sectors of the Services Sector were mixed.

The three sub-sectors comprising Transport, Storage and Communications, Wholesale and Retail Trade, Restaurants and Hotels, and Finance and Insurance, Real Estate and Business Services all registered lower growth rates in 2004 compared to 2003.

The remaining sub-sectors, including Government Services, however, performed relatively better.

On fiscal developments, Mr Baah-Wiredu said in 2004, as in the preceding years of the government, the principal objective of fiscal policy was to reduce and stabilize the domestic debt.

"The fiscal framework was, therefore, geared to eliminate the reliance on domestic financing of the operations of Government. "The challenges that have confronted Government have been in relation to the increasing wage bill and the burden of servicing the domestic debt, including the accumulated debts of Tema Oil Refinery (TOR), Electricity Corporation of Ghana (ECG), and Ghana Water Company Limited (GWCL)."