IC Research, the research arm of investment bank, IC Securities has maintained its forecast of Ghana’s Gross Domestic Product (GDP) growth for 2023 in the range of 1.9% to 2.9%.   

It expects sustained momentum in the livestock and crops sub-sector to spur growth within the agriculture sector while ICT, transport & storage, and education will continue to support the services sector growth.

On the downside, it pointed out that “we expect aggressive fiscal consolidation in the second-half of 2023 to weigh on the public sector drivers of growth while the price sensitive trades, hospitality and industry sector remain constrained by cost pressures in 2023”.

Ghana’s overall real GDP growth outperformed expectations in quarter one of 2023, posting a 4.2% year-on-year expansion compared to the consensus expectation of 2.6%.

A stronger-than-anticipated expansion in the services (10.1%) and agriculture (4.8%) sectors outweighed the contractions in the price-sensitive industry sector (-3.2%) to power growth above expectations.

Services sector to falter in quarters ahead

IC Research said the services sector outperformed expectations but is likely to falter in the quarters ahead.

The services sector logged an impressive 10.1% year-on-year growth in the first quarter of 2023, on the back of jumbo growth rates in Public Administration & Defence (37.6%), Health & Social Work (31.6%), and Education (26.0%).

There were also more private sector-led growth in ICT (18.9%), Finance & Insurance (8.6%), Transport & Storage (6.4%), as well as Real Estate services (5.1%).

However, the price-sensitive Hospitality (-0.2% y/y) and Trade (-5.3% y/y) sub-sectors contracted in as a result of foreign exchange squeeze, removal of the benchmark discount policy at the ports, and utility tariff hikes since August 2022.

“Overall, we remain bullish on growth in ICT and Transport & Storage in 2023 due to the ongoing digitalization within the public and private sectors as well as emerging private transport and logistics businesses. However, we are bearish on public sector-led sub-sectors and cautious on finance & insurance activities as financial institutions prioritize post debt exchange recapitalisation in place of profit growth”, IC Research stressed.

Manufacturing sub-sector outlook remains bearish

Furthermore, it said it remains bearish on the manufacturing sector outlook both from the perspective of a tighter operating environment and softening consumer demand.

In addition to the FX pressures, “we expect the quarterly hikes in utility tariffs and the recent increase in excise duty to elevate the operating cost of manufacturing businesses. Despite the higher cost of operation, we believe distributors of consumer goods will be unable to fully pass on the cost implication of higher taxes and utility tariffs due to weak demand conditions”. Consequently, it foresee a contraction in profit margins, leading to weaker growth momentum for the manufacturing sector with negative spill over to the trade sector.