Since its return to a multi-party political system more than two decades ago, Ghana has taken major strides towards democracy, with its judiciary proving independent and generally gaining the trust of Ghanaians. Ghana consistently ranks in the top three for freedom of the press and freedom of speech in Africa, with broadcast media strongest and radio the most far-reaching medium of communication. These factors put Ghana in an enviable position and provide it with social capital.
On 7 December 2016, Nana Dankwa Akufo-Addo of the opposition New Patriotic Party was elected President. The electoral process was peaceful with Akufo-Addo receiving 54% of the vote to former President Mahama’s 44.5%, averting a second round of elections. Akufo-Addo and Mahumdu Bawumia were sworn-in as president and vice-president on 7 January 2017. The President has since sworn-in his Ministers of State. The size of his victory clears the way for him to implement his political agenda but significant economic challenges remain. The President in his maiden State of the Nation address has pledged to reduce the budget deficit and cut waste in all sectors of public life.
Recent Economic Developments
Ghana’s economic performance during 2016 was mixed. After making solid progress on fiscal consolidation in bringing the fiscal deficit down from 10.2% of GDP in 2014 to 6.3% in 2015, the target to narrow it further to 5.3% of GDP in 2016 was missed by a wide margin with the deficit widening to 9% of GDP. Nevertheless, GDP growth at 3.6% was slightly higher than the forecast of 3.3%, and inflation, after remaining stubbornly above 17%, fell a little to 15.4% in December and further to 13.3% in January 2017, closer to the central bank’s target range of 6%–10%.
Furthermore, in spite of weak commodity prices, Ghana’s external balance improved in 2016, reflecting increased exports and a fall in imports. The current account deficit narrowed to 6.4% of GDP in 2016 from 7.6% of GDP in 2015. Gross foreign reserves increased marginally from $4.4 billion in 2015 to an estimated $4.9 billion, equivalent to 2.8 months of imports at the end of 2016.
Ghana’s near term prospects are good, absent further fiscal slippage. Economic growth is expected to accelerate in 2017, spurred by improvements in both the oil and non-oil sectors. Oil production is expected to increase as repairs are completed in the Jubilee field and the TEN Field reaches its full capacity. The non-oil growth sectors, including services, are also expected to remain robust. Surveys conducted by the central bank indicate a positive outlook for business sentiments; this will go a long way to improve private sector investments. The expected rebound in commodity prices will support the exports and growth necessary to stabilize the exchange rate and create employment going forward.
However, near-term challenges are substantial and downside risks remain high, reflecting in part the need for the new government to build credibility in prudent fiscal management. In addition, uncertainties in the global environment, including whether the nascent recovery in commodity prices will be sustained, could negatively affect foreign direct investment flows to Ghana.
Ghana is also likely to face continued high domestic and external financing costs as its debt expands and global interest rates rises. In addition, the new government face a number of other major challenges: high youth unemployment; ongoing delays in the resolution of debt incurred by energy state-owned enterprises; and the high cost of electricity and need to better match its capacity and the demand for supply.
Last Updated: Apr 20, 2017