PHOTO CREDIT TK3.6%, and then a further 15.1% last year as oil prices rebounded
from the 2014-2016 price crash. About $1 billion has fl owed into
the Ghana Petroleum Funds in the last three years, which Emeka
Ucheaga, CEO and chief economist at equity research and
investment advisory fi rm EUA Intelligence in Lagos, Nigeria,
believes can support future growth of the economy.
All this now faces a stiff challenge following a further decline in
global oil prices spurred by the Covid-19 disruptions. To e sure,
Ghana has had to deal with similar troubles for some time; the
long-term fall in oil prices beginning in 2014 has reduced its oil
revenue by about half. But the worldwide drop in energy demand
that followed the slowdown in economic activity in the fi rst half
of this year portends widening fi scal and current account defi cits.
That’s a dramatic turnabout from less than a year ago. In
a September 2019 note, the World Bank estimated Ghana’s
current account surplus in the fi rst half of 2019 to be 0.1% of
GDP, “supported by favorable trade conditions of Ghana’s three
main export commodities—oil, gold and cocoa.” That surplus,
combined with signifi cant infl ows to the capital and fi nancial
accounts, resulted in an overall balance of payments surplus
of nearly 2% of GDP. The country boosted its international
reserves to more than $8.6 billion with the issuance of the $3
billion eurobond in March 2019.FURTHER DIVERSIFICATION NEEDED
Still, there were issues. In the first quarter of last year, the
Ghanaian currency (the cedi) came under pressure due to high
demand for foreign exchange. Although this receded, the cedi
depreciated by 12.9% against the US dollar in the year ended
December 2019, the Ministry of Finance noted at the end of
July, and after a brief respite in the fi rst quarter, again lost value
in April, May and June.Bracing For
Contraction
With an election looming,
Ghana’s economy grapples with
a pandemic, falling oil revenues,
a nagging fi scal defi cit and the
imperative to diversify.
T
his is an election year in Ghana: Citizens will go
to the polls in December to elect a new president
and members of Parliament. But this nation, one of
Africa’s best economic performers, faces challenges
extending beyond a political transition.
Ghana needs to fi nd new sources of growth and economic
diversifi cation to sustain the momentum that has seen annual
growth of over 6% for the past three years. The economy has
already slowed, growing only 4.9% year-on-year in the fi rst
quarter, down from 7.9% in the last quarter of 2019. It was the
slowest since the second quarter of 2016.
The Bank of Ghana has reduced its GDP forecast for the year
to between 2% and 2.5%, down from the previously forecast
6.8%, owing to the Covid-19 pandemic. Others, such as the
International Monetary Fund (IMF) and the World Bank, put
growth for 2020 at 1.5%.
In an April 6 note, the IMF attributed the initial economic
shock to “trade disruptions with China, a decline in commod-
ity prices [including oil] and tightening fi nancial conditions,
even before the fi rst confi rmed case [of coronavirus infection]
on March 12.”
“We did not plan for this unthinkable crisis, but we did pre-
pare our economy well for tougher times,” President Nana Addo
Akufo-Addo said on June 27, when the New Patriotic Party
renominated him. Akufo-Addo will face John Mahama, candidate
of the National Democratic Congress, for a third consecutive time.
After long years of exploration, Ghana joined the league of
oil-producing countries about 10 years ago, boosting earnings
and economic growth. Last year, it was one of the fastest-growing
economies in the world, buoyed by double-digit growth in the
petroleum sector. In 2018, oil receipts accounted for about 20%
of Ghana’s foreign exchange earnings as the sector expanded PHOTO CREDIT TK
56 | Global Finance | September 2020
COUNTRY REPORT
GHANA | By Vincent Nwanma