Africa > West Africa > Ghana > Ghana Outlook for 2015-17

Ghana: Ghana Outlook for 2015-17


The country (Ghana) is situated in Western Africa, bordering the Gulf of Guinea, between Cote d'Ivoire and Togo.
It has borders with Burkina Faso for 549km, Ivory Coast for 668km and Togo for 877km.
Land in Ghana is mostly low plains with dissected plateau in south-central area.The climate is tropical; warm and comparatively dry along southeast coast; hot and humid in southwest; hot and dry in north.
  The languages (inclunding Akan, Moshi-Dagomba, Ewe, and Ga).


Policy reality check as IMF provides assistance

At end-February 2015, agreement was reached with the IMF for a three-year Extended Credit Facility (ECF) financial support package of approximately USD940 mn. Formal board approval is required in April but this should be a formality. The facility is intended to offset the negative economic effects of weak gold and cocoa prices and to support reforms aimed at limiting fiscal and current account deficits. Fund support will replace some investor confidence, although an effective reform strategy (and implementation) will be required to carry that over in to the medium term.

As part of the reform strategy and associated austerity measures aimed at restoring deficit sustainability, the local authorities have agreed to introduce a 17% petroleum tax, to freeze public sector employment levels and to curtail energy subsidies. The in general fiscal consolidation plan suggests that a challenging period will ensue and the rate of in general increase will slow (see below), but not collapse. Ghana’s before good track record of economic management and governance will aid it in the near term and oil and gas output will provide a boost from 2017.

Relative to other nations in Sub-Saharan Africa, Ghana consistently ranks highly in the World Bank’s Relieve of Doing Business surveys, with only Mauritius, South Africa and Rwanda assessed higher in 2015.

Strong GDP increase in the period up to 2014…

Annual average GDP increase was above +5% in 2000-08, a relatively good rate of expansion but around the pace required for a country like Ghana to make positive advances in socio-economic development. In that period, increase largely reflected the performances in the gold, cocoa and forestry industries and associated exports. However, increase of GDP accelerated in 2011, boosted by the energy sector as oil output came on stream at the Jubilee oilfield in that year, at the same time as GDP expanded by almost +15%. The impetus from that significant economic development was not maintained in 2012 and 2013 but GDP increase still registered over +7% in those two years.

…but the short-term outlook is less positive before a rebound from 2016

While the Jubilee oilfield is presently producing crude oil, other fields have from presently on to be developed fully and natural gas output holds further potential, inclunding through the Atuabo gas processing plant and associated infrastructure. Output of crude oil was 99,000 bpd in 2013, with a target of 190,000 bpd by end-2016. Accordingly, high GDP increase rates are possible from 2016-17 but, in the interim, austerity and consolidation measures will limit increase. EH forecasts GDP increase will slow to around +4.25% in 2015 (+4.5% 2014) and rebound to approximately +6.5% in 2016.
Twin fiscal and current account deficits provide vulnerability

In recent years, governments of varying political allegiance have consistently promoted pro-market policies. Despite current financial constraints, EH does not envisage a redirection in broad policy formulation. Even so, twin deficits on the fiscal and current accounts require careful management. It was partially because of these deficits that Ghana was one of the frontier markets to experience contagion from a general sell-off in emerging markets in 2014.

Governments have opened the economy to bilateral assistance, inclunding multilateral support, and this is most noticeable in the involvement in the country of China. The lending programme with the China Development Bank includes large infrastructure projects, inclunding in the energy, transport (road, rail and ports) and agriculture sectors.

Public finances

Fiscal deficits (inclunding -11.8 % of GDP in 2012) are not sustainable over a protracted period and the economic reform programme supported by the IMF’s ECF targets reductions in the coming years. Public deficit is currently equivalent to around 65% of GDP. The government successfully issued a Eurobond of USD1 bn in 2014 and this is half to finance the government budget (and support the GHS).

Current account deficits will remain large, although declining in the medium term

Large current account deficits (annual average -8.6% of GDP in 2000-08) were recorded before oil output came on stream and exports of crude oil have presently boosted the trade balance. However, imports of energy-related capital goods maintained large current account deficits (-11.9% of GDP in 2013). EH expects deficits of around -8% and -9% in 2015 and 2016, respectively. Next that, with machinery and other oil-industry inputs largely in place and export earnings increasing, current account deficits should be lower.

Foreign exchange reserves provide import cover of above three (but below four) months but FX levels will increase into the medium term. Foreign deficit ratios are increasing but servicing commitments remain comfortable (deficit servicing/export earnings around 2%).

Country Rating B2

Outlook for 2013-17


Established track record of good governance, with a functioning democratic system and peaceful transfer of power part political parties.
Natural resource base (cocoa, gold, forestry etc.) presently supplemented by discovery of commercially-exploitable oil reserves – output from 2011.
Strong GDP increase in recent years.
Market-oriented policy framework.
Positive relations with the IFIs.


While some safeguards are established, the ability and capacity to manage oil wealth is from presently on to be tested fully.
Continuing twin deficits (fiscal and current account) require careful management.
Frontier markets, inclunding Ghana and Nigeria, are not immune from sell-off pressures in emerging economies. There is therefore periodic risk of currency depreciation, FX reserve depletion and capital flight.
Although per capita incomes have improved, poverty remains pervasive in some rural areas.
Regional instability and uncertainties, inclunding in Burkina Faso, Nigeria and Mali.

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