Consumption in Ghana

Ghana - Consumption

GDP growth eases in Q1

The economy lost some steam in the first quarter amid a second wave of Covid-19 infections and the reimposition of restrictions, with GDP growth slowing to 3.1% in annual terms from 3.3% in Q4 2020. Meanwhile, in seasonally-adjusted quarter-on-quarter terms, GDP grew 0.8%. matching the prior quarter’s increase.

The quarterly slowdown was largely due to the services sector—which accounts for a large share of GDP—expanding at a more moderate pace (Q1: +4.0% year-on-year; Q4 2020: +4.6% yoy). Moreover, the agricultural sector also grew at a slower rate (Q1: +4.3% yoy; Q4 2020: +8.2% yoy). More positively, the industrial sector bounced back to growth in Q1, recording a 1.3% expansion and contrasting Q4’s 0.4% contraction. The upturn was chiefly due to strong growth in the construction and manufacturing subsectors, although overall growth was capped by a contraction in the mining and quarrying subsector.

Looking ahead, GDP growth is set to pick up pace in Q2 and Q3, as the vaccine rollout accelerates and Covid-19 restrictions are lifted, which bodes well for the recovery of domestic demand.

Commenting on the risks to the outlook, Leeuwner Esterhuysen, econometrician at Oxford Economics, noted:

“While Ghana’s economy is well diversified, it remains reliant on gold, oil, and cocoa for exports, growth, and revenues. As such, further commodity price shocks could set the recovering economy back once again. West Africa, and Ghana particularly, is currently experiencing significant disruptions in electricity generation and supply, which will further prevent various sectors from operating at full capacity. Ultimately, our short-term economic outlook for Ghana remains cautiously optimistic.”

FocusEconomics Consensus Forecast panelists project GDP to expand 4.6% in 2021, which is down 0.3 percentage points from last month’s forecast. In 2022, panelists expect GDP to grow 4.9%.