Ghana’s economy is expected to continue growing during 2019, writes Itumeleng Mukhovha.
Despite the many challenges affecting global economies, economic recovery in sub-Saharan Africa is set to continue. In particular, the Ghanaian economy is expected to grow at 8.8% in 2019, thus doubling the pace of emerging economies and outstripping the growth of advanced economies.
Ghana’s economic growth and development has been heightened by a growing population, an emerging middle-class, increased urbanisation and the achievement of significant macroeconomic gains over recent years – with single digit inflation, strong exports of cocoa, gold and oil, higher reserve and capital requirements, fiscal consolidation and the banking sector ‘clean-up’.
The World Bank Group’s latest Doing Business Report [italics] regards Ghana as the most attractive and conducive investment destination in the West African sub-region, due to the relative political stability and improved macroeconomic conditions, over the last two decades.
Ghana’s economic growth declined to a mere 1.6% in 2015 due to a combination of declining commodity prices, energy rationing and a fiscal crisis in 2013. On the other hand, increased oil production, the commencement of production in the Sankofa-Gye Nyame oilfield, the recent discovery of oil in commercial quantities off Sekondi-Takoradi and macroprudential policies, are expected to propel Ghana’s overall real gross domestic product. The new gross domestic product series also present major adjustments in the agriculture, industry and services sectors.
Ghana’s 2019 half-year fiscal performance was primarily driven by the industrial sector – especially oil, gas and mining.
Ghana is endowed with an enviable amount of minerals, including, gold, bauxite, diamond and manganese. The country’s largest mineral deposits, particularly gold, are found in the western, Ashanti, central, Brong-Ahafo and eastern regions. Ghana’s mining industry accounts for 5% of its gross domestic product and 48.7% of the total exports.
Ghana’s heavy reliance on primary commodities, including cocoa, gold and oil (which are all prone to the volatility of international commodity prices) create uncertainty about its actual future paths for growth, inflation, export receipts and domestic revenues. In an attempt to improve the economy’s competitiveness for the private sector-led investments in non-natural resource sectors, the government has introduced a number of agriculture and industry related policy initiatives that are expected to drive economic growth.
Itumeleng Mukhovha is the Corporate M&A Associate at Baker McKenzie.