GhanaInsightsMacroeconomic update

22 September 2023

Ghana’s 2Q2023 Real GDP Growth: Walking On Quicksand

In brief

  • The Ghanaian economy expectedly showed signs of a slowing momentum in 2Q2023 as the drag from fiscal tightening, cost pressures, and credit squeeze intensified. Provisional real GDP growth rate for 2Q2023 printed in line with market expectation at 3.2% y/y (median expectation: 3.3%), lower than the 4.8% y/y outturn in the same period of 2022.
  • In our update on the 1Q2023 GDP growth – Peeling the Onion – we opined that the provisional growth of 4.2% was better-than-expected, largely due to the outsized interim public expenditure. However, the updated and reconciled data for public spending on compensation of employees in public administration, health, and education sectors showed a lower growth than initially reported. Consequently, and unsurprisingly, the revised real GDP growth for 1Q2023 revealed a slower growth of 3.3% y/y, 90bps lower than the provisional growth of 4.2% earlier reported.
  • Interrogating the 2Q2023 growth performance, we identified the fragile industry sector as a potential quicksand in the growth trajectory, which poses further downside risk to overall growth in 2H2023 and FY2023. However, we find comfort in a resilient agriculture and services sector growth. In view of this, we revert our FY2023 growth forecast to between 1.9% – 2.9% (midpoint: 2.4%), lower than FY2022 outturn of 3.1% but above GOG revised target of 1.5%.
  • In 2H2023, we perceive lingering downside risk to construction sector growth, mainly from the IMF-related fiscal austerity which resulted in a 23.0% cut in CAPEX for 2023 amidst oil revenue shortfall. We also expect the manufacturing sector to remain subdued in 2H2023 as higher taxes, and costly utility tariffs continue to strain margins while softening consumer spending weigh on volume growth. However, we believe the ICT sector growth, which partly reflects ongoing CAPEX investment by telecom companies, and a generally strong agrarian output will partly mitigate the downward pressure.

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