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Poverty Reduction in Ghana: Progress and Challenges

Latest Issue: 
  • October 2015

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STORY HIGHLIGHTS
  • In the last two decades, sustained and inclusive growth has enabled Ghana to reduce the poverty rate by half, according to a new World Bank poverty assessment
  • A more diversified economy and better educated skilled labor has driven growth, but growing inequality in consumption, regional disparities and a deteriorating macroeconomic environment pose challenges
  • Policies to stimulate the private sector, improve infrastructure and improve access to opportunities can consolidate Ghana’s middle income status

WASHINGTON, October 15, 2015 – Ghana’s strong economic growth in the past two decades helped cut the country’s poverty rate in half, from 52.6% to 21.4% between 1991 and 2012. This is based on Ghana’s national poverty line. But according to the newly released “Poverty Reduction in Ghana: Progress and Challenges,” report, sustained poverty reduction requires a commitment to reducing inequality and improving access to opportunities for all citizens.

The report examines the factors behind Ghana’s remarkable economic performance and progress in poverty reduction, as well as the challenges to continued national growth. It also provides a roadmap for consolidating Ghana’s middle income status.

“Ghana entered a new stage of development when it was designated a middle income country in 2011,” says Pierella Paci, Lead Economist with the Poverty Global Practice at the World Bank. “Their challenge is to ensure that prosperity is shared across the entire population. A multifaceted, well-targeted and fiscally sustainable package of policies that balances the needs of the poor with the needs of the economy will help Ghana move in the right direction.”

Economic and socio-demographic change driven by structural transformation, the emergence of a more skilled labor force and geographical mobility helped reduce poverty in Ghana.

Additional report findings include:

  • Ghana’s annual growth in gross domestic product (GDP) was steady, averaging between 4 and 5% in the 1990s, ultimately reaching a stable rate of nearly 8% after 2006.
  • Ghana’s rapid growth accelerated poverty reduction, cutting the poverty rate from 52.6% to 21.4% between 1991 and2012. In 2012, Ghana’s poverty rate was less than half the African average of 43%. Extreme poverty declined even more, dropping from 37.6% in 1991 to 9.6% in 2013.
  • There was also improvement on non-monetary indicators of poverty. Infant mortality declined from 57 deaths per 1,000 live births in 1998 to 41 in 2014 and under-5 mortality declined by more than half.
  • Although agriculture is still the main sector of employment, diversification of the economy beyond agriculture helped drive economic growth. The share of agriculture in GDP declined to 23% in 2012 as the service sector (23.9% of GDP growth) expanded.
  • A better educated and more mobile labor force has resulted in better job opportunities: Between 1991 and 2012, the share of the labor force without schooling dropped from 41% to 21%.  Fast-growing Accra and Ashanti gained over 2.4 million inhabitants.
  • Growing inequality in household consumption, regional disparities in welfare and a deteriorating macroeconomic environment are challenging progress in Ghana. By 2012, consumption per capita among the top decile of distribution was seven times greater than among the bottom percentile and the Gini index rose 8%, from 37.5 to 40.8. Poverty has become concentrated in rural areas and the North, with one out of three poor people living in rural areas. Since 2014, GDP growth has halved and is projected to flow further to 3.4% in 2015 due to energy rationing, high inflation and fiscal consolidation.
  • The right policies can consolidate Ghana’s success in poverty reduction and promote shared prosperity.  Recommendations for continued growth in Ghana include focusing on preventing further macroeconomic deterioration, improving the business climate to grow the private sector, investing in infrastructure and skills development and expanding social protection.


Contacts

Accra, Ghana
Kennedy Fosu
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