Business Strategist, David Ofosu-Dorte, says businesses looking to expand this year will face very severe challenges.
According to him, while many businesses had not envisaged such a harsh economic terrain coming into the New Year, the prevailing crisis means companies would have to adapt and probably shelve some of their plans in order to weather the storm.
He noted in particular that the ongoing domestic debt exchange will deprive businesses of key financing support as a result of the liquidity problems it will create for banks in the coming months.
Speaking on JoyNews’ PM Express Business Edition, he said, “Most businesses don’t expand using returns on bonds except the financial sector. Businesses expand using loans and debt instruments or other corporate financing instruments that they take.
“The challenge is that the banks are going to have liquidity problems, so you still will not be able to do that expansion because the banks will not be giving you the money or the cost of that borrowing will be so outrageous that you’ll not be able to make returns on it so definitely expansion programmes are going to be very very difficult.”
He added that even for businesses that have other sources of income, borrowing for expansion will still be very difficult.
“And if you reduce it to GDP terms, the government’s own expectation of GDP is not that bullish because if businesses are not growing and expanding then we are going to have a situation where we are going to contract. There will be some growth but I don’t expect very bullish growth,” he said.
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