Consumption in Ghana

Ghana - Consumption

GDP growth records slowest increase since Q3 2020 in Q1

GDP growth slowed markedly to 3.3% year on year in the first quarter, from 7.0% in the fourth quarter of last year. Q1's reading marked the softest since Q3 2020.

The industrial sector grew 1.3% annually in the first quarter, decelerating from the fourth quarter's 4.8% increase, due to a contraction in the construction subsector. In addition, the agricultural sector lost steam, growing 5.6% in Q1 (Q4: +8.2% yoy). Meanwhile, services sector growth fell to 3.7%, marking the worst reading since Q3 2020 (Q4 2021: +8.1% yoy). The sector was likely weighed on by weaker government spending as the health, education and public administration subsectors recorded declining output.

On a seasonally-adjusted quarter-on-quarter basis, economic growth waned to 0.9% in Q1, following the previous quarter's 1.8% growth. Q1's reading was the worst since Q3 2020.

Looking ahead, growth over the remainder of the year will likely be markedly below last year’s average. Moreover, the country’s current account and fiscal shortfalls cloud the outlook, which in early July led the government to request IMF support.

Analysts at the EIU highlighted the potential benefits of an IMF package:

“The Fund's assistance […] aims to strengthen investor confidence, restore fiscal and debt sustainability, and build foreign reserves to buffer against economic shocks. We expect a new IMF programme to be approved in the coming months, which will help to restore macroeconomic stability, boost reserves and catalyse external financing. […] This is especially pertinent given Ghana's inability to access credit from the Eurobond market in 2022.”

Meanwhile, regarding the growth outlook, analysts at JPMorgan were somewhat downbeat:

“GDP growth in Q1 […] was significantly lower than consensus expectations. […] We believe the outlook for growth this year is now quite challenged against the backdrop of significant BOG hiking, high and persistent inflation, currency pressures and fiscal expenditure cuts. We revise our GDP growth forecast sharply downward to 3.5%oya and 4.9% in 2022 and 2023 from 5.9% and 6% respectively.”

FocusEconomics panelists project the economy to expand 4.6% in 2022, which is unchanged from last month’s forecast, and 4.8% in 2023.