The government of Ghana has revised its Real GDP growth forecast for 2022 downwards by 2.1 percentage points to 3.7 percent due to the recent global and domestic economic challenges.

Finance Minister, Ken Ofori-Atta, highlighted in the mid-year budget review that the global economy is engulfed in crises unimagined since world war II, resulting in a conflagration everywhere.

He noted that global inflation and interest rates are at record high and monetary policy adjustments in advanced economies are also tightening financing conditions for emerging markets.

The Financial Times (FT) estimates that investors have pulled about US$50bn from emerging market bond funds in 2022, the most severe net outflows recorded in 17 years, Hon Ofori-Atta said.

Ken Ofori-Atta further underscored that “our economy has been impacted by these global developments”. He indicated that the revenue measures outlined in the 2022 Budget have underperformed, largely due to the delays in passing and implementing these measures.

“In the light of the significant changes in the global environment and our own unique challenges, we have revised our economic growth estimate for 2022 to 3.7 percent, down from 5.8 percent as stated in the 2022 Budget”.
Bank of Ghana

The Finance Minister revealed that Non-Oil GDP Growth rate has also been revised downwards to 4.3 percent, down from 5.9 percent forecasted in the 2022 budget statement.

Ken Ofori-Atta said that inflation surged to 29.8 percent as at End-June 2022 as compared to 9.0 percent in June 2021. He noted that the cedi depreciated against the US dollar by 16.86 percent between January and End-June 2022, compared to 4.1% at the end of 2021.

“These have contributed to rising cost of living and labour agitations. Interest Payments have been revised upwards from GH¢37.5 billion (7.5% of GDP) to GH¢41.3 billion (7.0% of revised GDP), mainly on account of inflationary pressures and exchange rate depreciation resulting in higher cost of financing”.
Bank of Ghana

Growth momentum relatively resilient

The Finance Minister said in the face of these adverse domestic and external headwinds, growth momentum has however, been relatively resilient. The Ghana Statistical Service reported that the economy continued to grow, moderately growing at 3.3 percent in the first quarter of 2022, he said.

In addition, he disclosed that the Bank of Ghana’s updated Composite Index of Economic Activity (CIEA) recorded an annual growth of 15.8 percent in March 2022, compared to 26.3 percent in the corresponding period in 2021, due largely to increased industrial production, increased credit to private sector, exports, and higher tourist arrivals.

Overall, real GDP grew strongly by 5.4 percent in 2021 compared to 0.5 percent recorded in 2020 and the revised 2021 annual target of 5.1 percent. Non-oil GDP growth also increased to 6.9 percent compared to a growth of 1.0 percent recorded in 2020, and the revised 2021 target of 7.0 percent.

Hon Ofori-Atta noted that there have been some major shifts in budget assumptions compared to the main budget presented in November, 2021. He said these changes have led to reduced revenues, increased interest payments and changes in interest rates and exchange rates.

“However, we are committed to staying within the appropriation for 2022. In spite of the underperforming revenues and strong external headwinds, we are not seeking additional funds in this Mid-Year Review”.
Bank of Ghana

He further assured that “We are determined to efficiently use the windfall from the upstream Petroleum Sector to make-up for our revenue shortfall and aggressively improve our revenues even as we rationalize expenditures”.