In brief
- Ghana’s real GDP growth rate for FY2023 came in at 2.9% y/y, representing the second consecutive year of slowdown in annual GDP expansion after posting a 3.8% growth in FY2022 from 5.1% in FY2021. However, the FY2023 growth rate out-performed the authorities’ revised target of 2.3% and our midpoint forecast of 2.4% while perfectly aligning with our upper band forecast of 2.9%.
- In our view, the second consecutive year of decline in Ghana’s real GDP growth rate reflects the prolonged impact of elevated cost pressures and the 2023 domestic debt exchange which eroded the working capital of businesses and the purchasing power of households. We also attribute the decline in annual growth rate partly to the aggressive squeeze in fiscal and monetary policy under the ongoing 3-year IMF programme which commenced in May 2023.
- Services sector growth beat our estimate on the back of rebound in hospitality, and transport while the trade sub-sector avoided our forecast contraction. As expected, we observed a marked slowdown in annual growth rates for public sector-related services as the IMF-induced fiscal austerity took a toll on the sub-sectors.
- The construction sector particularly caught our attention within the industry sector as its woes deepened from -6.8% y/y in FY2022 to -9.9% in FY2023. In our view, this largely reflects the squeeze from fiscal austerity while external debt default resulted in the suspension of some public projects amidst overdue contractor payments. We also believe the elevated cost of construction materials also weighed on demand and private sector construction activity.
- Having endured the worst of recent economic shocks with the ongoing policy adjustments delivering modest signs of macro-level improvements, we perceive favourable conditions for a rebound in economic activity in 2024. Consequently, we believe the slowing momentum in Ghana’s growth rate has bottomed-out with the economy primed for a modest recovery in 2024. We thus reiterate our FY2024 growth forecast range of 2.8% – 3.8% (midpoint: 3.3%).
Downloads
Download Full Report