Ghana's macroeconomic indicators point to strong growth in 2019

The economy registered positive growth in 2018, albeit at a slower rate than in the year prior. Real GDP expanded 5.4% year-on-year (y-o-y) in the first half of 2018 compared to 7.8% in the same period of 2017, according to the budget statement presented to Parliament in November 2018. Momentum picked up between July and September, when GDP registered its highest quarterly growth for the year, at 7.4% – against 8.7% in 2017 – according to the most recent report from the Ghana Statistical Service (GSS).

Industry was the fastest-growing sector, expanding by 10.4%, 11.1% and 11.7% in the first, second and third quarters, respectively. The mining and quarrying segment underpinned this performance, expanding by 28%, 24.7% and 23.9% during the same three quarters.

The results put the economy on track to grow by 7.9% over the whole of 2018, compared to 8.1% in 2017, according to remarks from President Nana Akufo-Addo in his New Year’s address, though GSS data is not due to be released until March 2019. The IMF’s latest global outlook report forecast Ghana’s economy to continue a trend of robust growth by expanding 7.6% in 2019.

Inflation & Interest

Inflation edged down throughout 2018, with the consumer price index standing at 9.3% y-o-y in November, below the 11.8% year-end rate for 2017, according to the GSS. The food and non-alcoholic drinks component of the index rose by 8.6% y-o-y, up from 6.8% in January 2018, but well below the 13.6% recorded in December 2017.

The slower rate of food price inflation was offset in part by higher-than-average cost increases in some key non-food categories. While overall non-food inflation declined y-o-y, from 12% in January to 9.7% in November, transport costs – which include fuel prices – rose by 13.7%. Other above-average increases included the clothing and footwear component, at 12.6%, and miscellaneous goods and services, at 10.3%.

While the annualised inflation rate was within the Bank of Ghana (BoG) target of 8% plus or minus two percentage points, the bank’s monetary policy report from December 2018 noted that it was nonetheless higher than hoped, and the bank announced that it would maintain its benchmark lending rate at 17% for the third time in a row, after rates fell by a cumulative three percentage points in the first half of 2018.

Key Segments

Industry observers expect significant growth in the banking and hydrocarbons sectors in 2019. In September 2017 the BoG issued instructions for lenders to lift their minimum capital levels by 233%, from GHS120m ($24.8m) to GHS400m ($82.9m), by January 2019. The mandate was issued after a series of banks became insolvent and shut down, with the BoG taking over their operations and rolling the failed lenders into Consolidated Bank Ghana.

While some banks were not expected to meet the new threshold by year’s end, a total of 22 had already done so, President Akufo-Addo told the press in mid-December 2018. Overall, the banking sector posted stronger profits after tax due to lower costs, improved efficiency and higher levels of solvency, though the level of adjusted non-performing loans stood at 11.4% as of October 2018, up from 10.5% the previous year.

Meanwhile, oil and gas majors are expected to be more active in 2019, as interest has surged in a series of newly offered fields. At the end of December 2018 the government held the first open round of bids for exploration licences, with 16 companies – including US-based ExxonMobil, France’s Total and Italy’s Eni – submitting bids on a series of onshore and offshore blocks. Decisions on which bids will be accepted will be announced later in 2019.

The open bidding process replaces the earlier practice of awarding exploration and extraction rights through closed negotiations. The 60 bids lodged through the first open bidding round have served to underscore the increased interest in Ghana’s hydrocarbons potential, which should see a greater inflows of foreign investment to the industry in the years to come.