GhanaInsightsMacroeconomic update

21 December 2023


In brief

  • Ghana’s overall real GDP growth slowed to 2.0% y/y in 3Q2023, from a revised 2.7% in the same period of 2022 and average of 3.2% in 1H2023. Tellingly, the seasonally-adjusted quarter-on-quarter outturns showed broadly weaker growth rates for all the three sectors with industry posting the worst outcome of 1.1% q/q shrinkage to drag overall growth rate to 0.5% q/q (vs 0.7% in 2Q2023).
  • The broad slowdown in the sequential and annual growth rates underscores our longstanding view that Ghana’s real GDP growth is losing steam amidst IMF- and inflation-induced policy squeeze despite the seeming outperformance in 1H2023. We also believe a likely surge in the GDP deflator on account of comparatively outsized inflation in 9M2023 weakened the latest real GDP growth. In view of this, we reiterate our FY2023 forecast of 2.4% ±0.5pp, with a likelihood to close the year along the upper limit of between 2.4% – 2.9%. For FY2024, we project overall growth at 3.3% ±0.5pp.
  • Although contractions in the oil and gas sector had been a major drag on extractive sector growth since 2020, the 3Q2023 outturn showed a 0.9% y/y growth in oil & gas. This confirms lower gold production as the proximate cause of the 8.1% y/y contraction in the extractive sector in 3Q2023 and raises sustainability questions about the BOG’s Gold-for-Reserves programme as a support for forex reserves in 2024. On a bullish note, we think the positive turn in manufacturing reflects the benefit of improved FX performance and easing price pressures, which bodes well for the outlook. However, we believe there is substantial spare capacity in the sector which requires several quarters of expansion to exhaust.
  • The services sector chokes on fiscal squeeze although recovery in trades and hospitality is a breath of fresh air. Following the outsized growth recorded in 1H2023 with a front-loaded fiscal support, growth in public administration, education, and health expectedly moderated in 3Q2023 as the IMF programme commenced. The trades and hospitality sectors gave us something to cheer with return to growth territory, respectively growing by 2.4% and 11.2% y/y in 3Q2023 from contraction territory the previous year. The pulse test suggests positive outlook for 4Q2023 and FY2024 on the back of festivities and tourism-induced boost to trades and hospitality.

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