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. 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 and an ongoing energy crisis. The opposition New Patriotic Party (NPP) has requested a new voter registration system from the Electoral Commission after claiming that a number of irregularities have been found. The NDC has disputed the claims put forward by the NPP, further stating that there is no need for a revised system.
Ghana made a significant progress in poverty reduction, and met the Millennium Development goal of halving poverty rates by 2015 to 24% in 2013 from 52% in 1991. Real GDP growth is projected to fall to 3.4% in 2015 from 4% in 2014. Nevertheless, Ghana’s long-term growth prospects are positive. The growth rate is projected to rebound to 5.9% in 2016 and 8.2% in 2017, assuming that energy rationing will be resolved in 2015, and planned fiscal adjustment remains on track to achieve the 2017 objectives with the support of the IMF and other development partners.
Recent Economic Developments
Ghana’s fiscal consolidation program, which started in late 2014, is on track, as the fiscal deficit narrowed more than the budget projections in June 2015. The primary balance, estimated at 0.6% of GDP (against the target 0.6% deficit), represents a significant improvement from the 1.4% deficit in June 2014, while the overall fiscal deficit was reduced to 2.2% of GDP from 4.3% during the same period.
The current account deficit narrowed to 2.6% of GDP in June 2015 from 5.2% for the same period of 2014.
Ghana experienced net capital outflows in June 2015, partly driven by deterioration in perceived risk in the midst of global market volatility. As a result, gross international reserves were down by $1.1 billion by end-June to $3.2 billion (equivalent to 2.1 months of import-cover), and the Ghanaian cedi lost 21% of its value against the US$ by September, 2015.
Inflation has remained high, despite the tighter monetary policy stance and slowdown in economic activity. Inflation rose to 17.3% in August from 16.4% in January, reflecting the sharp currency depreciation and fuel price adjustments.
Real GDP growth is projected to fall to 3.4% in 2015 from 4% in 2014, as energy rationing, high inflation, and ongoing fiscal consolidation continue to undermine economic activity. Ghana expects to receive large capital inflows in the coming months: a possible Eurobond issuance up to $1.5 billion (of which only $1 billion to be issued with the World Bank guarantee to restructure its debt); and disbursements from development partners. Ghana’s long-term growth prospects are positive.
Last Updated: Oct 05, 2015