Fitch Solutions has maintained its forecast that the Ghanaian economy will expand by 3.0% in 2023, down from 3.1% in 2022. 

This is contrary to the 1.5% revised forecast by the World Bank and the expected 1.7% by the International Monetary Fund.

"We maintain our forecast that the Ghanaian economy will expand by 3.0% in 2023 - down from 3.1% in 2022 - as high inflation and fiscal prudence under the country’s IMF programme weigh on domestic demand".

Data released by Ghana Statistical Service showed that the economy slowed modestly to 3.2% year-on-year in the first quarter of 2023, from a revised 3.3% in the first quarter of 2023.

The deceleration in growth was primarily caused by a continued contraction of 10.2% in fixed investment and weakening exports. In contrast, growth in private consumption rebounded to 5.8% from 1.9% in quarter one 2023, the strongest performance since quarter 2 of 2022.

Economic growth to disappoint in second-half of 2023

“We expect that economic growth will soften further in half year 2023. Fiscal prudence under Ghana’s Extended Credit Facility with the IMF will put a damper on domestic demand”, the UK-based firm pointed out.

“While we expect inflation to moderate over the coming months – from the August print of 40.1% year-on-year – as a result of exchange rate stability and statistical base effects, it will remain elevated, ending the year at a projected 25.9%. This will continue to erode households’ purchasing power and cap consumer spending over the remainder of the year”, it mentioned.

In addition, Fitch Solutions, said, a tight financial conditions (the Bank of Ghana has hiked the benchmark policy rate by 1,150 basis points to 30.00% since late 2021) will weigh on business activity and keep fixed investment firmly in contractionary territory.

Indeed, business confidence remains muted, suggesting that corporate investment is unlikely to recover in half-year 2023.

Net exports to drag on economy

The report said net exports will once again become a drag on Ghana’s economy in 2024. 

“Our Mining team projects healthy growth of 5.0% in gold production, driven by the restoration of existing mines, the introduction of new gold mining projects, and the integration of artisanal miners into Ghana's official gold output”.

Meanwhile, the Agribusiness team forecasts growth of 3.0% in cocoa output as an increase in farm gate prices will stimulate production and reduce smuggling activity, providing tailwinds to exports next year.

“However, we expect import growth to outpace exports, narrowing Ghana’s goods and services surplus. Moderating price pressures will improve purchasing power of households and boost demand for imported consumer products in 2024”, it added.

In addition, Fitch Solutions said a stronger business activity – in part the result of the central bank slashing interest rates by a projected 600 basis points to 22.00% by year-end – and an anticipated recovery in the construction sector will increase demand for imported capital inputs and professional services.

Risks to outlook

The UK-based also said risks to the economic growth forecasts are skewed to the downside. 

“There is a possibility that inflation will remain hotter than our current projection assumes due to higher-than-expected global energy prices or a stagnation in the external debt restructuring process, which would cause another round of currency depreciation. Should this happen, the Bank of Ghana would likely keep interest rates higher for longer and public discontent with the macroeconomic predicament would result in more frequent protests and strikes”, it explained.

In this scenario, consumer spending and gross fixed capital formation, it pointed out, would remain weaker in 2024 than our baseline scenario assumes.