The Economist Intelligence Unit ( EIU) has predicted the country’s GDP growth to hit a negative growth of one per cent this year.

According to the EIU, in 2021 the GDP growth will hit 3.5%, 6.5% in 2022.
The Economic Intelligence Unit is also predicting the country’s GDP growth to hit 6.4% in 2023 and 6.3% in 2024.

The government’s original fiscal projections for 2020 have been thrown into disarray by the global pandemic and associated fall in oil prices.

The government now estimate that oil receipts will be some GH¢5.7 billion ($989m) below the figure they previously forecast (which was based on an average oil price assumption of $58/barrel). Non­oil revenue will also be about GH¢2.3bn lower, largely because of lost import duties—as borders are closed and companies are shut down, reducing global trade flows. Alongside the hit to revenue, spending needs will rise.

The government expects health outlays to increase by nearly GH¢1.6bn because of the extra demands resulting from the coronavirus. Against this backdrop, we expect the fiscal deficit to widen to 7.8% of GDP in 2020, up sharply from an estimated 5.1% of GDP last year.

In response to the deteriorating fiscal position, the authorities are seeking parliamentary approval for a number of emergency measures—including a lowering of the cap on withdrawals from the Ghana Stabilisation Fund (a sovereign wealth fund).

Underlining the growing strain on the public finances, the government is also reportedly considering abandoning its policy of not borrowing from the Bank of Ghana (BoG, the central bank)—a constraint that has been in place since 2015 in line with IMF recommendations.

Given the current exceptional circumstances, “we expect the IMF to agree to a temporary waiving of this requirement. In 2021-24 we expect the expenditure/GDP ratio to decline, as the government seeks to narrow the fiscal deficit in the wake of the elections and an anticipated recovery from the pandemic.”

Meanwhile, rising oil production from new fields and higher oil prices in 2021-23 (with a small dip forecast in 2024) will support revenue growth. Although many loopholes are likely to remain, tax reforms will also help to boost government receipts.

“Overall, we expect the fiscal deficit to decline steadily, to 3.5% of GDP in 2024. As a result of this fiscal consolidation, we forecast that the public debt/GDP ratio will fall from a peak of 76% in 2021 to 69% in 2024.”

Given weak local demand for government debt, owing to limited liquidity in the domestic capital market, the government will continue to depend on external borrowing.

In February Ghana raised $3bn through a Eurobond issue that was five times oversubscribed.

However, given the current turbulence in global capital markets, the near-term focus will shift increasingly to borrowing from multilateral lenders. In this respect, Ghana is expecting assistance from the World Bank, alongside a disbursement under the IMF’s rapid credit facility.

Monetary policy

Monetary policy in Ghana has historically been volatile, a tendency that is being reinforced by the fallout from the coronavirus pandemic.

On March 18th the BoG cut its policy rate by 150 basis points, to 14.5%, reflecting its concerns over the outlook for economic growth.The BoG then followed up by reducing the primary reserve requirement that commercial banks are obliged to maintain from 10% to 8%, as a way of freeing up more liquidity for lending.

“We expect average annual inflation to increase slightly in 2020, but to remain within the BoG’s target range of 6-10%. With economic activity set to weaken sharply over the coming months, further near-term monetary easing is therefore possible.”

Despite a forecast recovery in real GDP in 2021, interest rates will remain low—reflecting the slack in the economy resulting from this year’s slump. A period of tightening will then follow in 2022-24 as domestic demand strengthens and inflationary pressures start to pick up.

Economic outlook

The government, led by the ruling New Patriotic Party (NPP), faces the challenge of seeking to contain fiscal pressures caused by the coronavirus pandemic and the sharp drop in global oil prices while limiting the associated socio-economic damage. The next national elections are due in December 2020.

The Economist Intelligence Unit expects the NPP to retain power, as the party is seen as a better custodian of the economy than the opposition National Democratic Congress.

The government’s ambitious industrialisation programme is enjoying some success, with investment expected to recover once the virus subsides.

Nonetheless, overall progress will continue to be hampered by structural weaknesses and regional imbalances. Driven by falling oil prices and operational difficulties in some oilfields, the economy will contract by 1% in 2020.

Real GDP growth will then rebound to an average of 5.7% a year in 2021-24, as the impact of the pandemic fades and oil prices and output both recover.

The government’s industrialisation push and moves to strengthen the banking sector will benefit non-oil economic growth over the medium term, although the cost of capital will remain a constraint on some businesses, particularly small and medium-sized enterprises.

Following a marked weakening in 2020—reflecting a deteriorating current­account position and investor nervousness ahead of the elections—the pace of cedi depreciation will slow in 2021­24 as the hydrocarbons sector ramps up production and prices rise.


Inflation will average 8.6% in 2020-24, staying within the central bank’s 6-10% target range. The current-account deficit will gradually narrow in 2021-24 as external conditions improve, reaching 0.3% of GDP by the end of the forecast period.

Policy trends

The main focus of policy has shifted for the time being to dealing with the consequences of the coronavirus pandemic. Extra funding is being set aside for Ghana’s already overstretched health system, together with measures aimed at softening the blow to economic activity caused by the pandemic and a sharp drop in oil prices.

The government is also faced with the challenge of limiting public finances. As part of its response, the government is negotiating with institutional investors to accept a 200-basis-point reduction in yields on short-term Treasury instruments. The authorities estimate that, if their proposal is accepted, it would result in savings of about GH¢300m ($55m) in debt­servicing costs.

It remains to be seen, however, whether investors will accept any significant reduction in yields.

The NPP administration will also continue to prioritise industrialisation, in line with its One District, One Factory (1D1F) initiative. Of the 58 completed projects, 45 are in the Greater Accra, Eastern and Ashanti regions.

Few projects have been launched in the more remote northern regions, highlighting the continuing regional imbalances in terms of economic development. Another key priority is a further development of the oil and gas sector.

The government plans to revise laws on oil and gas licences in an effort to spur production and investment.

However, poor data quality reduced investor interest in a licensing round in July 2019, while low global oil prices will act as a further deterrent in 2020-21. Nonetheless, Ghana’s large oil reserves are likely to attract further investment over the medium term.