In brief
- Ghana’s overall real GDP growth outperformed expectations in 1Q2023, posting a 4.2% y/y expansion compared to the consensus expectation of 2.6%. A stronger-than-anticipated expansion in the services (10.1%) and agriculture (4.8%) sectors outweighed the contractions in the price-sensitive industry sector (-3.2%) to power growth above expectations.
- A cursory view of the headline rates would suggest recovery in Ghana’s growth momentum towards the 2021 trajectory, creating a false impression of resilience in the real sector. However, peeling a layer of the onion will reveal that while the overall growth appears good on the outside, the sub-sectoral dynamics raise questions about sustainability amidst fiscal austerity in the quarters ahead.
- The services sector outperformed expectation but is likely to falter in the quarters ahead. While the growth momentum appears inspiring, the public sector orientation of the growth drivers amidst the outlook on fiscal austerity, tapers our optimism about its sustainability for the rest of the year.
- Industry continues to bear the brunt of price shocks with a negative near-term outlook. We are bearish on the manufacturing sector outlook both from the perspective of a tighter operating environment and softening consumer demand. In the construction sector, we believe the drags partly reflect financing challenges as overdue payments from the government continue to restrain access to bank credit and weighs on activity within the sector. Against this backdrop, we maintain our bearish FY2023 overall real GDP growth forecast range of between 1.9% – 2.9% (midpoint: 2.4%) for now.
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