EIU predicts government will overspend its budget in 2020

Despite projecting a fiscal slippage in 2020, the firm added that the quantum of slippage will be less than those witnessed in 2012 and 2016 – which recorded close to 10 percent fiscal deficit.

EIU predicts government will overspend its budget in 2020

The Economist Intelligence Unit (EIU) is predicting that government will struggle to lower its expenditure in the run-up to the 2020 general elections.

Despite government passing the Fiscal Responsibility Act last year aiming to limit future budget deficits to a maximum of 5% of GDP, the London-based business advisory firm expects the government to record a 5.5 percent budget deficit come next year.

In its July 2019 Country Report, the EIU stated that following the completion of the IMF programme in April 2019, and a period of fiscal consolidation, it expects to see some spending laxity.
Overall, we expect the fiscal deficit to widen from 3.4 percent of GDP in 2018 to 5.5 percent of GDP by 2020 as a result of rising expenditure,” the EIU said.
Given that the government has struggled to meet its domestic revenue targets, EIU’s forecast implies that the government will have to fall on the capital markets and other funding sources to make up for the excess spending.

But the EIU forecasts a quick return to consolidation, leading to a lower deficit in 2023, of 3.3 percent of GDP.
Nonetheless, longer-term debt sustainability will still require ongoing fiscal responsibility and sustained economic growth,” the UK-based firm said.
Source: Richard Annerquaye Abbey