With strong price pressures and weak private sector sentiment, Fitch Solutions believes economic activity will slow further in Q422. The agency expects economic activity to slow further in 2023 as tight fiscal and monetary conditions and strong price pressures weaken domestic demand.
Despite the challenging economic conditions, Ghana’s export sector is expected to remain relatively resilient. Increased production of the country’s key commodities – gold, oil and cocoa – will boost export growth. In fact, the Fitch Solutions team projects that gold production growth will remain healthy after the Bibiani mine restructuring, along with efforts to formalize artisanal and small-scale gold mining. Additionally, the agribusiness team forecasts robust growth in cocoa production as favorable weather conditions in Q422 are likely to result in a strong harvest.
The country’s trade balance is also expected to improve in the coming years. With private sector activity curtailing amid still-high inflation and rising taxes, import demand is likely to fall, reducing the country’s trade deficit. This is further supported by an increase in exports, which will add 2.1 percentage points (pp) to core economic growth in 2023, up from 1.7 pp in 2022.
However, the tightening of fiscal and monetary conditions will hamper the country’s economic growth. The government is implementing measures to reduce its budget deficit and curb inflation, which has led to increases in taxes and interest rates. These measures curb consumer spending and investment, negatively affecting economic growth.
Ghana’s inflation rate also rose, averaging 48.3% in Q422. This is higher than the government’s target of 8% and will continue to be a major concern in the coming years. The high inflation rate is driven by a combination of factors including rising food and fuel prices and a weak currency. The government has implemented several measures to curb inflation, such as raising interest rates and reducing subsidies, but these have not been enough to bring inflation under control.