The government of Ghana has projected an overall real GDP growth of 2.8 percent for the 2023 fiscal year with the Non-Oil Real GDP growth forecast at 3.0 percent.
The target set for the 2023 fiscal year was based on the overall macroeconomic objectives and the medium-term targets for the period 2023 to 2026.
Finance Minister, Ken Ofori-Atta, disclosed that the current global economic challenges, coupled with high uncertainties, are expected to adversely affect economic performance in the current year and next year.
“This is expected to lead to a slowdown in growth, following a quick and sharp recovery in 2021 from the COVID-related slowdown in 2020. Overall GDP is projected to grow at 3.5 percent and 2.8 percent in 2022 and 2023 respectively. The expected slowdown in growth in 2023 is mainly on the back of the perceived impact of fiscal adjustment and the implementation of a possible debt management strategy as part of measures to ensure fiscal and debt sustainability.”
Ken Ofori-Atta
However, the economy is expected to rebound from 2024 and grow steadily in the medium-term to record an average growth of 4.3 percent over the period 2023-2026. Growth is projected at 3.9 percent, 4.9 percent, and 5.6 percent, in 2024, 2025, and 2026, respectively.
Government cuts GDP growth
In the 2022 Mid-Year Fiscal Policy Review, government cut the overall real GDP growth from an earlier projection of 5.8 percent to 3.7 percent for 2022.
Data on the performance of the economy at the end of the third quarter of 2022 highlighted the continued adverse impact of the challenging global and domestic environment on the economy.
These developments, according to Ken Ofori-Atta, have manifested through rapid exchange rate depreciation, high inflation, unsustainable debt burden, fiscal stress and external sector shocks despite the monetary and fiscal policy interventions that were deployed in the first three quarters of the year.
However, government assessed that economic performance was robust in the first half of 2022 amidst the global and domestic challenges facing the economy.
Real GDP growth averaged 4.0 percent year-on-year for the first half of 2022 compared with 3.9 percent during the same period in 2021. The relatively strong growth of 4.8 percent in Q2, up from a growth of 3.4 percent in Q1, was largely driven by the Services and Industry sectors, the latter bolstered by the Manufacturing sub-sector.
Non-Oil GDP expanded by 4.1 percent and 6.2 percent in the first and second quarters in 2022, respectively, compared with 5.3 and 6.6 percent over the same periods in 2021. This corresponds to an average Non-oil GDP growth of 5.1 percent for the first half of 2022 compared with 5.9 percent in the first half of 2021.
The increase in overall growth performance for the period was mainly driven by strong recovery in the industry sector as well as strong growth in the Agriculture and Services sectors. The Industry sector recovered from a contraction of 3.1 percent in H1 2021 to an expansion of 1.8 percent in H2 2022. The Agriculture and Services sectors grew by 4.9 percent and 5.4 percent in H1 2022 respectively, compared to 8.9 percent and 8.0 percent in H1 2021, respectively.
Price pressures
Price pressures, however, have remained elevated since the beginning of the year. The latest data indicated that headline inflation accelerated to 40.4 percent in October 2022, from 37. 2 percent in September and 33.9 percent in August. The rise in the October inflation was broad-based, driven by both food and non-food prices. The upturn in food and non-food inflation was influenced by prices of both local and imported components in the consumer price basket.
The Monetary Policy Rate has increased by 1,250 basis points (from 14.5% to 27%) since the beginning year as the Central Bank deployed this monetary policy tool to anchor inflation expectations.
Experts have warned that continued rise in inflation amid the Central Bank’s hawkish stance, will bite hard on growth this year, which may fall lower than the government’s expectations.
