J Curve of Ghana – Economic Analysis


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The Ghanaian economy is slowing down and its deceleration is quite widespread. According to data presented by the Chief Statistician, Professor Annim, GDP growth in the first quarter of 2022 was 3.3% year-on-year, compared to 7.0% in the fourth quarter of 2021. Information and communication were the best performing sector in Q4 2021 and Q1 2022, but again the growth rate almost halved. In the longer term, Ghana stands to gain from structural factors such as the diversification of its export base, the formalization of the economy and international connectivity.


The economy grew by 0.5% in 2020 and 5.4% in 2021, according to government estimates. However, the outlook for 2022 is undermined by pressure on household spending from the highest rates of inflation and depreciation reported in West Africa, as well as constrained public spending and sector investment. private. Although the prices of Ghana’s main export – cocoa1, gold and especially oil – are all improving compared to a year ago, the country is experiencing strong capital outflows. International reserves fell from 4.3 months of import cover in December 2021 to 3.7 months at the end of April 2022, and the exchange rate (GHS/USD) fell by 22% between December and May 2022 alone.

Access to international capital is therefore a crucial issue for the country. But concerns about the management of Ghana’s public finances (as well as growth prospects) make the difficult environment for emerging market debt particularly acute for Ghana. The government is adamant that it will not go to the IMF, while national interest groups like the Trades Union Congress (TUC) have demanded that it stick to this tactic. Alternative “local” measures include a digital transaction tax (e-levy) introduced in May 20222which the authorities hope will generate substantial revenue and boost confidence in policy-making.

There will be other consequences. Consumer price inflation rose from 13.6% in January to 27.6% in May, and the implementation of the tax could add further pressure. To anchor expectations, the Bank of Ghana raised its policy rate from 17% to 19%, a more dramatic increase than any other central bank authority in the sub-region. Staff will meet again in July3 and although the real policy rate is still negative, it is difficult to raise it to the same extent a second time in an environment of slowing GDP growth. In addition to its inflation target, the Bank of Ghana has a mandate to promote economic growth.


In the short term at least, central government is limited in its ability to introduce the kind of subsidies demanded at the street level. Its budget deficit is above the target for the period and the public debt is estimated at 76% of GDP. In this context, the authorities must focus on redressing internal and external balances and attracting capital. In March, Finance Minister Ken Ofori Atta released plans to strike an external financing deal of up to $2 billion and review currency retention policy. Part one underway – minister seeks parliamentary approval for $1 billion syndicated loan4. But published changes to the currency retention policy are pending, while access to forex has become difficult for some critical players in recent weeks, for example bulk oil distribution companies.

Beyond its current setbacks, Ghana’s economic forecast is benefiting from projected demand for at least two of its three main exports – oil and gold – while ceteris paribus, currency devaluation is increasing the competitiveness of the economy. local production. At the same time, Ghana’s current digitalization policies are creating momentum for a more formalized economy. The cash flow disadvantages that caused electronic transactions to grow from $13 billion to $44 billion between 2016 and 2020 still exist, while (a) in order to avoid the application of the electronic tax on salary payments and invoices, businesses must register with the Ghana Revenue Authority, and (b) from July 1, financial institutions will be required to use the Ghana Card to register account holders.


1. However, the 2021-22 crop is expected to fall below the 2020-21 crop by 15% or more.

2. Charged 1.5% on transactions over GHS 100 (USD 12.80) per day

3. July 20-22 meeting, July 25 press release.

4. https://www.bloomberg.com/news/articles/2022-06-11/ghana-gets-1-billion-pledge-from-banks-to-spur-finances

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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