Ghana’s economy will slow significantly in 2023, as the Economist Intelligence Unit is forecasting a 1.3% expansion of the economy.

This is below the projections by the World Bank (1.8%) and the International Monetary Fund (1.6%)

According to the UK based organization, real GDP growth will slow in 2023 as rising prices and monetary tightening weigh on private consumption and investment.

Subsequently, government spending would decline.

In its 2023 County Report on Ghana, it said growth will remain subdued in 2024 as tightening continues, adding, it will then pick up over 2025-27, driven by an uptick in gold and oil exports earnings as new projects come on stream”.

"Growth will slow to 1.3% in 2023, as a cost-of-living squeeze, public spending cuts and monetary
tightening by the BoG will cause domestic demand to contract for the first time since 2014.
Reduced consumption and sustained cedi depreciation will, however, help to boost net exports,
the sole growth driver in 2023 and the main factor behind our growth forecast of 2.3% for 2024", it added.

Further, EIU said macroeconomic instability and a public debt crisis will weigh on Ghana's business environment and its ambitions to become a West African trading hub.

A weak regional regulatory environment, poor transport links and low foreign trade, except in commodities, will also hamper progress.

Policy trends

Continuing, the EIU said it expects the government to remain committed to fiscal consolidation in 2023-27 in a bid to bring the public finances and debt back onto a sustainable path, underpinned by an International Monetary Fund programme.

The 2023 budget includes measures to both widen the tax net and extend spending cuts.

In line with EIU expectations, in mid-April 2023, President Akufo-Addo assented to three new revenue-raising bills: the Income Tax Amendment Bill, the Excise Duty Amendment Bill and the Growth and Sustainability Amendment Bill.

It added that the bills will boost revenue over the forecast period, helping to shrink the fiscal deficit to 7.1% of GDP in 2023 (from an estimated 8.3% of GDP in 2022) and steadily to 4.4% of GDP in 2027.

It stressed that “despite revenue mobilisation measures in the 2023 budget including the reintroduction of road tolls, a 2.5-percentage-point rise in the value-added tax (VAT) rate, to 15%, and an increase in excise duties, a slowing economy will keep revenue/GDP ratio below potential in 2023". 

However, it concluded that the quickening economic growth will push up the ratio in 2024-27, adding “increasing administrative efficiency under IMF guidance will also boost revenue in 2023-27, as will an increase in the trade tax take in 2025-27, driven by rising gold and oil output”.