Ghana Economic Outlook

  • Real GDP growth is estimated to have slowed for the fifth consecutive year due to tightened monetary and fiscal policies, among other factors, but is projected to recover in 2017 and 2018 if the non-oil economy improves and as new hydrocarbon wells come on stream.
  • The December 2016 elections resulted in the transition of political power to the opposition political party and some changes are to be expected in policy direction, including emphasis on measures to unleash private sector development.
  • While industry is the second largest contributor to Ghana’s GDP, its performance could be strengthened if industrial support policies and programmes were better targeted and measures to improve access to finance and tackle constraints related to skills and infrastructure could be prioritised.

Gross domestic product (GDP) growth is estimated to have slowed for the fifth consecutive year, from 3.9% in 2015 to 3.3% in 2016 as a result of the implementation of tight fiscal and monetary policies in the context of the International Monetary Fund (IMF) Extended Credit Facility (ECF) programme, and technical issues related to oil production. Growth is projected to recover to 7.1% and 8.0% in 2017 and 2018 respectively assuming restoration of energy supply, new hydrocarbon wells coming on stream and the timely resolution of technical issues that led to disruptions in the Jubilee oil and gas field in 2016. The growth is expected to be stronger if macroeconomic fundamentals improve, and impact positively on the non-oil economy.

The authorities successfully concluded the fourth review of the IMF ECF despite some delays in meeting some of its performance criteria. However, provisional estimates indicated Ghana would miss its year-end fiscal deficit target with the deficit estimated at 8.7% of GDP, above the target of 5.3%. This raises concerns about Ghana retrogressing on its fiscal adjustment programme. The main policy priorities in 2017 will be to ensure that the fiscal consolidation programme is on track, policies and measures to foster a revival of private sector investment and foreign direct investment (FDI) are adopted, and that the supply and governance issues affecting the energy sector are speedily addressed.

Ghana’s December 2016 elections led to the transfer of political power to the opposition political party, the New Patriotic Party, which won the presidential election with 53.9% of the vote while the incumbent National Democratic Congress obtained 44.4%. The transfer of power after one term of the incumbent appears to be a divergence from the pattern, under which a change occurs after two four-year terms, which has been the case since the initiation of the 4th Republic in 1992.

Ghana’s industrial policy dates from 2011. In 2016, a “Made in Ghana” policy was launched. The 2017 budget of the new government also includes a number of policy proposals and initiatives including a strengthened focus on local content, a new National Industrial Revitalisation Programme with a stimulus package for industry, a National Entrepreneurship and Innovation Plan (NEIP) and a “One District, One Factory” proposal to promote industrialisation from the ground up. The implementation of the 2011 industrial policy via the Industrial Sector Support Programme (ISSP, 2011-2015) was affected by the long-standing public sector resource crunch, the high cost of credit and limited access to start-up financing, and land and energy challenges. The new programme proposals seek to tackle many of these issues. To date, Ghana’s exports have also been heavily dominated by a few commodities which are vulnerable to developments in the world market, while value addition in mineral and agricultural value chains remained subject to various constraints. However, a dynamic entrepreneurial tech sector has been emerging. This could get a further boost from the NEIP when it is implemented. The NEIP is expected to serve as the primary vehicle for providing integrated support for early stage (start-ups and small) businesses, focusing on the provision of business development services, business incubators, and funding for youth-owned businesses. The government’s medium-term objectives also include developing high-quality education, entrepreneurship and job skills, which is to be welcomed.