Ghana place first out of 16 West Africa countries in Fitch Solutions Operational Risk Index rating.

According to the research by Fitch, Ghana scored 50.9 out of 100 in trade and investment. Ghana outperformed the West Africa average of 36.4 and ranks in a competitive 2nd position regionally, and in 88th place out of 201 markets globally.

The reports also noted that with a Crime and Security Risk score of 51 out of 100, Ghana outperformed the West Africa average of 33.3 and ranks in 1st place regionally and in 90th place out of 201 markets globally.

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Lower Public Investment To Slow Down Ghana Construction Industry Growth

Key View

• We forecast Ghana’s construction industry to grow by 4.1% y-o-y in 2022, a slowdown compared to the estimated growth of 5.7% y-o-y in 2021. Ghana’s infrastructure construction industry is unlikely to benefit from higher oil and gold prices, as we expect that increased public revenues will be channelled towards debt servicing and Ghana’s high public wage bill rather than capital projects.

• We expect that a substantial depreciation of the cedi against the US dollar in 2022 will, in the near term, make private sector investors more reluctant to invest in Ghana’s infrastructure and construction sector and offset the adverse impact of subdued public infrastructure spending on the market’s construction industry growth.

We forecast Ghana’s construction industry to grow by 4.1% y-o-y in 2022, a slowdown compared to the estimated growth of 5.7% y-o-y in 2021. Unlike in other markets, Ghana’s infrastructure construction industry is unlikely to benefit from higher oil and gold prices, as we expect that increased public revenues will be channelled towards debt servicing and Ghana’s high public wage bill rather than capital projects, as Ghana’s access to international capital markets will be constrained in the near term.

Accordingly, we forecast government capital expenditure to shrink to 3.3% y-o-y of GDP in 2022 and 2.9% y-o-y of GDP in 2023, down from 3.7% y-o-y in 2021. While this puts capital expenditure levels above those in 2018-2020, when Ghana’s construction industry growth averaged -0.1% per year, it remains below the comparatively high annual average levels of 4% of GDP between 2010 and 2017, which enabled the construction industry growth rates averaging 8.1% per year.

In 2023, we forecast Ghana’s construction industry growth to accelerate slightly as we forecast the depreciation of the Cedi against the USD to slow down to 4.6% y-o-y.

Generally, this will reduce revenue risks for foreign investors, while lower inflation will improve demand for residential and non-residential construction.

However, Ghana’s access to international capital markets will remain constrained and will continue to weigh on public infrastructure spending as well as the market’s construction industry growth.

Muted Public Spending Limits Construction Growth

Ghana - Government Capital Expenditure, % of GDP; Construction Industry Value, real growth, % y-o-y

Despite the market’s strong fundamentals, including a track record of private investment in energy infrastructure, comparatively high political stability and security, and a relatively diverse competitive landscape, we expect that a substantial depreciation of the cedi against the USD in 2022 will, in the near term, make private investors more reluctant to invest in Ghana’s infrastructure sector.

We, thus, do not expect that private investment will meaningfully cushion the negative impact of subdued public infrastructure spending on the market’s construction industry growth. We forecast that in 2022, the Ghana cedi will depreciate by 22.7% against the USD, significantly increasing revenue risks for the foreign investors that rely on expatriation of revenues.

Economic Openness Boosts Operating Environment In Ghana

Ghana & Regional Average - Trade & Investment Risk

Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Trade and Investment Risk Index

At the same time, Ghana ranks in first place out of the 16 West African markets included in our proprietary Fitch Solutions Operational Risk Index.

With a Trade and Investment Risk score of 50.9 out of 100, Ghana outperforms the West Africa average of 36.4 and ranks in a competitive 2nd position regionally, and in 88th place out of 201 markets globally.

Similarly, with a Crime and Security Risk score of 51 out of 100 Ghana outperforms the West Africa average of 33.3 and ranks in 1st place regionally and in 90th place out of 201 markets globally.