Since its return to multi-party system more than two decades ago, Ghana has made major strides towards consolidating its democratic achievements. Its judiciary has proved to be independent and has generally gained the trust of Ghanaians even after the dismissal of 22 justices for being implicated in a corruption scandal. The Ghanaian Parliament is vibrant, and despite inherent challenges and the dominance of the two leading political parties, has created the avenue for debate and vigorous legislative activity.
Ghana is constantly ranking 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. While all these put Ghana in an enviable political position, and provides it with formidable social capital, Ghana's economic course over the past couple of years raises many concerns.
The main threat to the ruling National Democratic Congress (NDC) is discontent at the rate of improvement in living standards, hikes in taxes, utilities and fuel prices. The opposition New Patriotic Party (NPP) has requested a new voter registration system or a transparent cleanup of the electoral register from the Electoral Commission after claiming that the electoral register includes ineligible voters.
Ghana’s real gross domestic product (GDP) growth is projected to rebound to 5.2% in 2016 from 3.4% in 2015 reflecting the positive impact of more a stable energy supply and increased contribution from the oil and gas and agriculture industries. Energy supply is expected to improve following the emergency measures including the use of power barges. The country’s medium-term growth prospect is strong with 8.2% in 2017 and moderating to 7.5% in 2018 under the assumption that fiscal adjustment remains on track with the support of the International Monetary Fund (IMF) and other development partners.
Recent Economic Developments
Ghana has embarked on the second year of its fiscal consolidation program with an ambitious target for 2016. After successfully cutting its fiscal deficit by more than three percentage points to 7.1% of GDP in 2015, Ghana’s 2016 budget aims to further reduce the fiscal deficit to 5.3% of GDP. The target was revised down from 5.8%, given the high level of public debt and the significant financing constraints.
The country’s external balance improved in 2015, despite unfavorable global economic conditions. The international prices of oil and gold, which account for 50% of Ghana’s exports, fell by 47% and 8%, respectively in 2015. Nevertheless, Ghana’s current account deficit narrowed to 7.8 % of GDP in 2015 from 9.6% of GDP in 2014 as the rise in other services exports and private transfers including remittances more than compensated for the increased merchandise trade deficit. Overall, the Ghanaian cedi lost 18% of its value against the US dollar in 2015 while it remained relatively stable following the Eurobond issuance ($1 billion) and disbursement of the Cocobod (short-term syndicated loan for $1.8 billion) in October.
Despite this progress, the country continues to face persistently high inflation, even with efforts to tighten monetary policy. The high inflation rate remain elevated at 18.5% in February 2016 compared to 17.7% in February 2015, even after the Central Bank’s 500 bps policy rate hikes. Ghana’s economic growth slowed for the fourth consecutive year to an estimated 3.4% in 2015 from 4% in 2014 as energy rationing, high inflation, and ongoing fiscal consolidation weighed on economic activity.
The government’s major challenge is to avoid slippage from the fiscal consolidation program in light of the upcoming general elections in late 2016.
Last Updated: Apr 12, 2016