The Centre for Policy Analysis (CEPA) has asked government to watch the fast pace at which inflation is falling, in order to avoid undue hardship in the economy, through output and employment reduction. CEPA raised the warning at a press briefing Wednesday, to create awareness on a new publication that it will release today in Accra, tided, "The Year 2010: from a Cocoa Economy to an Oil Economy." Making statements on portions of the publication, the Executive Director of CEPA, Dr. Joe Abbey said the measure of economic growth sacrificed to achieve reduction in annual inflation from 20% in 2008 to 16% in 2009, caused the nation an economic slack equivalent to 4.0 percentage points of gross domestic product. ''This also means the loss of the jobs that would otherwise have been created to produce this amount of lost output. Interestingly, the instrument for achieving this slack was the 4.0 percentage point reduction in the budget deficit /GDP ratio from 14.5% in 2008 to the CEPA estimate of 10.5% in 2009," he added. These analyses, based on a sacrifice ratio of one to one, between inflation reduction and economic growth, as estimated by IMP staff, have similar implications for reductions in inflation rates so far registered in 2010, and expected for the rest of the year. Accordingly, CEPA projects that based on its forecast, inflation will fall further by a cumulative 5.7 percentage points in 2010, from 16.0% in December 2009 to 10.3% for December 2010 - a corresponding loss in output equivalent to 5.7 percentage points of GD P would be created this year. ''This measure of output foregone will come with corresponding job losses that would otherwise be used to produce that output. This will be particularly severe for new entrants into the labour force, made up of the youth, but also small scale farmers may find themselves saddled with unsold produce with possible adverse effects on future consequences for investment and production," Dr. Abbey noted. Relating the state of affairs to the current appreciation of the cedi against major currencies (namely, the US dollar, the euro and the pound sterling) Dr. Abbey warned of signs of the "Dutch Disease," a variant of the "resource curse" even as the nation prepares to pump oil by December this year. He said anecdotal evidence suggests that some Ghanaians desire that the exchange rate of the cedi reverts back to parity with the US dollar. However, in CEPA's view, that would be the onset of the Dutch Disease. "The Dutch disease is so named because of its destructive effect, such as choking off the growth and employment potentials in non-oil sectors. "The lessons from the experience of other African oil producers, in which windfalls in foreign exchange earnings have had a number of negative economic repercussions, need to be fully learnt," CEPA highlighted. Dr. Abbey decried that the developments in Ghana's exchange rate stands as the exact opposite of what China, a richer country is doing in order to stimulate growth of the Chinese economy while creating increased jobs through the advantages of cheaper exports. "Chinese policy makers do not use the yuan as a tool for managing inflation. They use it instead as a tool to maximize exports and employment, a tool they appear not yet ready to give up. China is seen to have kept the value of its currency artificially low, thus implicitly subsidizing its exports while taxing its imports," he pointed out." Source: B&FT