Ghana sits on the Atlantic Ocean and borders Togo, Cote d’Ivoire, and Burkina Faso. It has a population of about 29.6 million (2018). In the past two decades, it has taken major strides toward democracy under a multi-party system, with its independent judiciary winning public trust. Ghana consistently ranks in the top three countries in Africa for freedom of speech and press freedom, with strong broadcast media, with radio being the medium with the greatest reach. Factors such as these provide Ghana with solid social capital.

Two and a half years after being elected president in a peaceful election, President Akuffo-Addo has marked some successes implementing some of its promises such as planting for food and jobs and free secondary education. But he also faces challenges fulfilling some of his election pledges—including setting up a factory in each of the nation’s 216 districts, one dam for every village and providing free high school education.

Recent Economic Developments and Outlook

Recent Developments. Ghana’s economy continued to expand in 2019 as the first quarter gross domestic product (GDP) growth was estimated at 6.7%, compared with 5.4% in the same period of last year. Non-oil growth was also strong at 6.0%. The relatively high quarterly growth was driven by a strong recovery in the services sector which grew by 7.2% compared with 1.2% in 2018.

The government continued with its fiscal consolidation efforts in 2019 even though there were still challenges in meeting the revenue targets. Fiscal performance for the first half of 2019 showed an overall budget deficit (on cash basis) of 3.3% of GDP higher than the target of 2.9% of GDP. This is because the revenue shortfalls of 1.6% of GDP was higher than expenditure cuts of 1% of GDP.

Private sector credit grew stronger, supported largely by the well-capitalized banking sector. Inflation continued to be in single digits in the first six months of 2019; gradually rising from 9% in January to 9.5% in April 2019 but reduced to 9.1% in June 2019 mainly driven by low food inflation.

Ghana’s current account in the first half of 2019 was estimated at a surplus of 0.1% of GDP supported by favorable trade conditions of Ghana’s three main export commodities—oil, gold and cocoa, resulting in a trade surplus of 2.8% of GDP. The current account surplus, combined with significant inflows to the capital and financial accounts, resulted in an overall balance of payments surplus equivalent to 1.9% of GDP. With the issuance of the $3 billion Eurobond in March 2019, the international reserves significantly improved in 2019 with Gross International Reserves (GIR) of $8.6 billion (equivalent to 4.3 months of import cover) at the end of June 2019.

The Ghana cedi came under considerable pressure in the first quarter of 2019, due to high demand, as importers sought to restock their supplies but, in the second quarter, the domestic currency market became relatively calmer. The Ghana cedi cumulatively depreciated by 8.2% in the year to July 18, 2019.

Outlook: Economic growth is projected to increase to 7.6% in 2019. Non-oil growth is expected to accelerate to 6% as the government’s new policies in the agriculture sector and the promotion of agribusiness begin to take effect. Inflation is expected to remain within the Central Bank’s target range of 6-10% over the medium term.

The pace of fiscal consolidation is expected to slow in 2019 and the overall fiscal deficit is projected at 4.5% of GDP in 2019 and, in the medium term, it will remain within fiscal rule ceiling of 5% of GDP.

Risks and Challenges: Maintaining a fiscal consolidation stance and staying on a sustainable path through the 2020 election cycle will be a challenge over the next two years. Also, Ghana’s energy sector is in dire financial conditions and without remedy, this poses serious fiscal risks in the coming years. The sector is facing high costs from excess power capacity and natural gas supply, which are exacerbating the existing revenue gap. An Energy Sector Recovery Program (ESRP), approved in May 2019, provides an action plan to the government to bring the sector back into financial balance over the next five years.