Since its return to multi-party system of governance more than two decades ago, Ghana has made major strides towards consolidating its democratic achievements. Its judiciary for instance, has proven to be independent and has generally gained the trust of Ghanaians even after the dismissal of 22 justices implicated in a corruption scandal.
Ghana constantly ranks among the top three in Africa for freedom of the press and freedom of speech. The broadcast media is the strongest, with radio being the most far reaching medium of communication. These put Ghana in an enviable political position, and provides it with formidable social capital.
On December 7th, 2016, Nana Dankwa Akufo-Addo of the largest opposition New Patriotic Party, was elected President of Ghana. The electoral process was peaceful, with Akufo-Addo receiving 53.72% of the vote to former President Mahama’s 44.53%, averting a second round of elections. Akufo-Addo and Dr. Mahumdu Bawumia were sworn-in as president and vice president on January 7, 2017. The size of the NPP victory clears the way for the president to implement his agenda politically, but significant economic barriers remain.
Ghana’s economy grew by 4.9% during the first quarter 2016 higher than 4.1% during the same period in 2015 supported by the strong services sector performance. However, overall gross domestic product (GDP) growth for 2016 could be below the 3.9% growth in 2015 due to production problems in the oil sector. After lingering above 18%, the inflation rate fell to 16.7% in July 2016—the lowest since March of 2015, reflecting the stable cedi and the maintenance of the tight monetary policy stance.
The GDP growth rate is expected to reach around 7.5% by 2018, assuming that the fiscal consolidation program remains on track and technical problems in the oil and gas sector are resolved.
Recent Economic Developments
Ghana’s fiscal consolidation program is broadly on track. Following the substantial reduction of the fiscal deficit from 10.2%of GDP in 2014 to 6.3% in 2015, Ghana aims to narrow it further to 5%of GDP in 2016. Nevertheless, in July 2016, Ghana revised its budget to reflect the expected shortfall in domestic revenue as a result of unanticipated technical problems in the Jubilee oil field and weaker than expected oil prices.
Ghana issued its fifth Eurobond on September 9th for $750 million with a coupon rate of 9.25%. The bond which was more than five times oversubscribed with total orders of $4.5 billion has a weighted average tenor of five years.
The country’s external balance improved slightly during the first half of 2016 despite the sharp contraction in oil exports. In tandem with global trends, capital outflows reversed, and foreign direct investment (FDI) inflows rose during the second quarter of the year. As a result, the depreciation of the Ghanaian cedi against the US dollar slowed with only a loss of 3.3% as of August 2016.
Near-term challenges for Ghana include continued high domestic financing cost, currently above 20% and only likely to ease slightly if the inflation rate continues to fall. In addition delays in the resolution of the energy problems related to state owned enterprises (SOEs) debt and technical problems in the oil sector, continued weak commodity prices and capital flows, and the risk of fiscal slippage ahead of the December election are all non-trivial challenges to Ghana’s economic outlook.
Last Updated: Jan 23, 2017