However, a report by the World Bank paints a more optimistic picture for the West African state, with projections and even its current performance showing a positive trend.
Ghana’s economic performance in 2023
Titled the ‘Macro Poverty Outlook: Country-by-country Analysis and Projections for the Developing World, this World Bank report which was recently released shows that Ghana’s economy stabilized in 2023H1 as a result of policies such as public debt restructuring, fiscal consolidation, and tighter monetary policy. This is, however, despite the fact that inflation remains over 40%, and public debt is unsustainable and in distress.
“In Q1 of 2023, GDP growth surprised to the upside with a rebound of 4.2 percent, compared to 3.0 percent in Q1 of 2022, on the back of strong growth in services (10.1 percent) and agriculture (4.8 percent),” the report reads in part.
However, the report also highlighted some of the persistent shortcomings in the country’s economy, including the performance challenges of some other sectors.
“The industrial sector contracted by 3.2 percent as all industry sub-sectors (extractives, manufacturing, water and sewerage, and construction) shrank, with the exception of electricity,” the report also notes.
As mentioned earlier, the slow but eventual rebound of Ghana’s economy is a result of policies implemented by the government to undercut fiscal shocks that threaten to undermine the government’s recovery process. This included the cutback of capital expenditures, and lowering of interest payments, propelled by external debt service standstill.
“The January-June 2023 fiscal balance improved to a deficit of 0.8 percent of GDP, significantly below the H1 target of 3.5 percent of GDP; the primary balance (commitment basis) recorded a surplus of 1.1 percent of GDP. Revenues, at 7.4 percent of GDP, were below the 8.1 percent target as oil revenue and international trade taxes underperformed,” the report highlighted.
Additionally, the World Bank in its report noted that the constant revision of monetary policies is part of the reason why Ghana is currently experiencing some economic relief.
The report reads, “The Bank of Ghana has cumulatively increased the monetary policy rate by 15.5 points since the beginning of 2022, to 30 percent in July 2023, and signed an MoU with the government to halt monetary financing of the fiscal deficit.
The cedi has stabilized at around GH¢11 per US$ since the second quarter of 2023, after having lost approximately more than 20 percent of its value against the dollar earlier this year.”
Recently, Ghana’s Finance Minister Ken Ofori-Atta revealed that the country’s economy was recovering, citing a stronger economic growth than the previous year and a smaller budget deficit than anticipated thus far this year.
Ghana’s immediate future
The projection of the immediate future of Ghana’s economy, according to the report looks promising. Although growth for 2023 is expected to flatline at 1.5%, 2024 holds a slight increase to 2.8%, and all things considered, Ghana’s economic growth should spike to a high of 5% in 2025.
“Growth is expected to slow further to 1.5 percent in 2023 and to remain muted in 2024 at 2.8 percent. Growth is projected to recover to its long-term potential of about 5 percent by 2025 as conditions normalize,” the report states.
“The ongoing fiscal consolidation, corrective monetary policies, high inflation, interest rates, and macroeconomic uncertainties will keep private consumption and investment low, leading to muted non-extractive growth. Extractives are expected to support 2023 growth thanks to the opening of large new gold mines and a planned expansion in oil and gas production,” the report adds.
Despite the positive projections, there, however, exists some risks to the country’s potential growth, the report highlights this, stating, “Risks to the outlook include financial sector stress following the DDEP, contingent liabilities in the energy and cocoa sector, domestic policy slippages with the 2024 elections being a particular risk, delays in external debt restructuring, commodity price and other external shocks, and sharper than-expected monetary policy tightening in advanced economies.”
