COVID-19: “Tighten your belts” – PwC to businesses
Audit and advisory firm, PricewaterhouseCoopers (PwC), has cautioned businesses across the country to gird their loins as COVID-19 impact deepens.
Senior Partner of the firm, Vish Ashiagbor, is of the view that, “Businesses and individuals should plan to continue to tighten their belts, re-strategise and adjust in order to survive and hopefully thrive, notwithstanding the pandemic”.
‘Tighten your belt’-the 80s and 90s economic vocabulary returns to financial lexicon amid a COVID-19 scourge that has forced the government to turn to an economic recovery programme to salvage the economy.
The pandemic has wiped out 168 lives with a total of 32, 969 cases. The number of patients that have defeated the disease are equally rising, and the number stands at 29, 494 as Monday, July 7.
Several firms have been reeling the impact with the Trades Union Congress (TUC) estimated job losses to be 500, 000 since the pandemic struck the country on March 12.
A chunk of the country’s resources has been channelled into solving the crises with the Minister requesting parliament to approve an additional GHC11.8bn.
Shrinking revenue and ballooning expenditure
Mr Ashiagbor in PwC’s review was particularly concerned about projected decline from estimated GHC67.1 billion in the 2020 Budget to a projected GHC 53.7 billion, a 20% decrease in the supplementary budget.
Meanwhile, expenditure is expected to rise by 13.7% from an estimated GHC 84.5 billion, in the 2020 Budget to GHC 96.3 billion in the supplementary budget.
Much of the expenditure is being swallowed by government interventions to tackle the pandemic as the state rolls out an audacious GHC 100billion 3-year recovery plan.
Soaring deficit and debt woes
Before the pandemic, the government had projected a deficit of 4.7% GDP to maintain fiscal discipline, but the figure has more than doubled to 11.4% raising concerns.
Just as Economist Professor Peter Quarter cautioned against double figures and placed a cap of 8%, the PwC was also concerned about the widening gap.
Tax cut will bring government GHC 99million
PwC projects that the 4% slash in Communication Service Tax (CST) will not “adversely impact government revenues. On the hand increased volume of online and phone services to avoid physical contact to curtail spread will increase the tax base.
As such, PwC estimates that “the reduced tax rate will allow additional revenue to earned from this tax item with an estimated revenue increase of GHC 99m”.
0.9 GDP positive
Mr Ashiagbor is optimistic that even though GDP shrunk from an estimated 6.8% to a meagre 0.9%, it represents a “positive indication that the economy is not expected to contract in 2020, as is the expectation in many other economies across the world” heading to a recession.
He said the mid-year review and supplementary estimate for 2020 indicate that, notwithstanding the pandemic, the government is forging ahead medium-term strategic initiatives, albeit under significantly more difficult economic conditions that have arisen due to COVID-19.