Ghana looks highly promising to be Africa’s star economic performer this year, according to all three of the international lenders focusing on the continent.
The country’s economic performance in the past year is looking so strong that it is poised to take the lead as Africa’s fastest-growing economy this year — for the first time in at least three decades.
Expansion in Ghana in 2018 should surpass that of recent champions Ethiopia and Cote d’Ivoire, according to forecasts from the World Bank, the African Development Bank — both released in the past month — and the International Monetary Fund.
Commodities including oil, gold and cocoa are the mainstay of the $43 billion economy and rising crude output is boosting the nation’s finances.
But a year after a new government took power, fiscal credibility, a recovery in credit growth and expansion outside the resources industry mean that the country’s standing is not just the result of growth slowing in Cote d’Ivoire and Ethiopia.
“Ghana has a more diversified economy than a lot of its African peers,” Capital Economics Limited economist John Ashbourne said by email. “Ghana is doing very well — this isn’t just a matter of being the last man standing.”
Oil booms
Ghana’s growth booms and busts have been closely linked to crude since it became an oil producer in 2010, when Tullow Plc started the Jubilee field. Economic growth surged to 14.4 per cent the following year, and slumped to less than 4 per cent from 2014 to 2016 as oil prices dropped.
Apart from being the world second-largest cocoa producer, Ghana also produces the most gold on the continent after South Africa. The government is investing in agriculture, and has pledged to set up factories in each of the nation’s 216 districts to diversify the economy.
“In 2018, we expect Ghana’s growth story to become more nuanced,” Razia Khan, chief economist for Africa at Standard Chartered Bank, said by email. “There will be much more focus on whether a robust recovery in the non-oil economy manifests itself.”
Deficit targets
Investors will look to see if Ghana can maintain financial discipline after years of chronic overspending. The country turned to the IMF for an almost $1billion bailout in 2015 as spiraling debt and high inflation pushed the cedi into freefall after the budget deficit ballooned to more than 9 per cent of gross domestic product.
While the nation is still at a high risk of debt distress, according to the African Development Bank, it’s on track to meet the fiscal-deficit target for 2017 and has negotiated an extension of the IMF programme until the end of this year.
Inflation in Ghana slowed to 11.8 per cent in December from a record 19.2 per cent in March 2016, allowing the central bank to cut its benchmark rate five times in a year, and the rate of credit growth to the private sector has doubled since August.
This will support expansion in the non-commodity sector, according to Yvonne Mhango, an economist at Renaissance Capital in Johannesburg.
“What distinguishes Ghana from others is the progress it is making in improving its fiscal credibility, by sticking to its targets and implementing other reforms,” she said.
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