Ghana

In 2022, Ghana’s economic growth decreased because of the sovereign crisis and activity reduced further in 2023 at an estimated +1.5%, bringing the pace of economic growth close to the almost 30-year record low of +0.5% in 2020. Non-extractive industries led the downturn because they were hit the hardest by the widespread slowdown brought on by falling corporate and consumer confidence, as well as the challenging external situation. The non-extractive sector grew at around +1% on average in 2022-2023, the slowest pace since the 1980s. If positive demographics are considered, this indicates a decline in living standards, while a moderate recovery is forecast in the second half of 2024, bringing the annual GDP growth to around +3% for 2024.

Currency depreciation has paused, giving some respite to businesses and banks. In December 2022, Ghana ceased to make payments on its external debt to official bilateral and external commercial creditors, leading to haircuts on sovereign debt and domestic debt as well. Gross international reserves fell to USD1.1bn (0.5 months of imports) at the end of February 2023, USD5bn below the level of mid-2021, due to FX interventions by the Bank of Ghana to reduce volatility. As a result of these factors, the value of the Cedi has dropped by -50% between 2022 and early 2023. The agreement reached with the International Monetary Fund in mid-May 2023 was the first step towards a comprehensive debt-restructuring process involving the G20 group, including China, as well as domestic creditors and has helped contain currency depreciation since.

Inflation will stay elevated throughout 2024. Prices rose sharply in late 2022, hitting +54% y/y in December and remained elevated throughout 2023, closing the year at around 23% (i.e., 15 points above the target) on a downward trajectory. However, food price inflation remains elevated, due to a persistent lack of confidence as well as poor financial and logistical alternatives. The central bank has hiked its policy rate by a total of 15.5pps since early 2022 to reach 30% in July 2023. To increase financial stability at the expense of credit growth, it also extended the reserve requirement from 8% to 14%. We expect inflation to remain in the double digits for 2024 as well, with interest rates declining visibly in the second half of the year only.

Ghana’s performance in terms of civil liberties, rights and political stability exceeds that of most African peers. Independent poll observers generally deem general elections in Ghana to be free and fair. The high electoral turnout rate (79% in the 2020 presidential election) testifies to the state’s credibility and to the country’s democratic achievements. Ghana’s strong record of accomplishment in democracy and rule of law is expected to prevent any serious social disorder, although the post-pandemic rises in unemployment and poverty, along with rising food and energy prices, have spurred discontent in recent years. Poor working conditions in the public sector and a lack of economic possibilities for young people are eroding trust in institutions. Future demonstrations may be temporarily disruptive but mostly peaceful and concentrated in urban centers.

Political life in Ghana will be defined by their bitter competition if the New Patriotic Party (NPP) retains power by a narrow margin and the National Democratic Congress (NDC) leads the opposition. With only 137 seats and the assistance of one independent member out of a total of 275, the NPP’s working majority in parliament makes it difficult to pass contentious legislation. Policymaking will be delayed throughout the rest of the government’s term because of the difficulty of reaching consensus on key legislation (particularly revenue-mobilizing acts).

As a result of anti-establishment sentiment and public anger with the current government over decreasing living standards, a transfer of power at the December 2024 election looks likely. Given the lack of budgetary headroom, we do not expect the present or next administration to be able to counteract the consequences of growing living costs through the imposition of subsidies, resulting in long-term popular anger and unrest. Nonetheless, policy will continue to concentrate on sustaining macroeconomic stability, given Ghana’s long history of democratic rule.