Fitch Solutions expects Ghana to recover in the medium term as a supportive market for private infrastructure investment in Sub-Saharan Africa as revenue and project cost risks subside and investors benefit from a comparatively strong institutional and legal enabling environment.

According to Fitch Solutions, the relative political stability and a positive track record of private infrastructure investment will also position the country as a supportive market for private infrastructure investment in the sub-region.

“We expect inflation to slow down and pressures on the cedi to reduce significantly in 2024, lifting downward pressures on private sector participation in Ghana’s infrastructure sector. Our positive medium-term outlook is further supported by Ghana’s relative long-term political stability in comparison to other regional markets, as well as stable to positive demand forecasts for automobiles, transport and logistics, and general consumption”.
Fitch Solutions

Inflation to average 25% in 2022

In a new report dubbed ‘Ghana’s Private Infrastructure Investment Set For Medium-Term Recovery’, Fitch Solutions noted that it expects Ghana’s Consumer Price Inflation to average 25% and 15% in 2022 and 2023 respectively.

Per this projections, inflation in the country is expected to remain above the Central Bank’s target of 8+-2% in the next one and half years. The projected inflation for 2022 is however, below the expectations of the Government which now targets end-year inflation of 28.5% in 2022 instead of the earlier target of 8%.

Fitch Solutions underscored that inflation will threaten to undermine project revenues and thereby exacerbate revenue risks for both domestic and foreign investors, leading to a rise in project costs.

“We expect that a likely increase in construction materials prices would increase project costs and pressure developers to delay investments”.
Fitch Solutions

Ghana imports large volumes of construction materials, with domestically produced cement amounting to less than 60% of domestically consumed cement throughout the largest part of the past decade.

In 2021, Fitch Solutions disclosed that Ghana’s trade deficit for iron and steel products was estimated to have exceeded $1.2 billion, up from an estimated deficit of over $780mn worth of iron and steel products in 2020.

Year-on-year inflation reaches 31.7%

The latest consumer price index release showed that the headline inflation accelerated further for the eleventh consecutive month to 31.7 percent in July 2022, from 29.8 percent in June 2022. This was driven by both food and non- food price pressures.

Food inflation rose to 32.3 percent in July 2022 from 30.7 percent in June 2022. Similarly, non-food inflation increased to 31.3 percent from 29.1 percent in June 2022, contributing 55 percent to the rise in headline inflation in July 2022.

The above developments have translated into relatively strong underlying inflationary pressures. Similarly, Bank of Ghana’s core measure of inflation, defined to exclude energy and utility indices, increased to 30.2 percent in July 2022 from 28.4 percent in June.

While inflation remains a threat to the outlook, the Bank of Ghana highlighted that ongoing policy discussions with the IMF are expected to address the underlying macroeconomic challenges, restore fiscal and debt sustainability, and provide sustainable balance of payments cushion.