The World Bank has forecast GDP growth to slow considerably to 3.5 percent this year as the economy continues to struggle with rising debt, inflation and exchange rate instability.

The projected growth for Ghana this year, according to the World Bank, is far below the country’s average pre-pandemic performance of 7.0 percent.

The recent projections by the Bretton Woods Institution means that the World Bank has revised the country’s GDP growth for 2022 downward by 2 percentage points. Earlier in the year, the World Bank affirmed its projection of 5.5% expansion of Ghana’s economy in 2022. Nevertheless, it raised concern about the rising debt, which it believed could erode gains going forward.

“The economy has been struggling with various setbacks, including rising public debt (104.6 percent of GDP), elevated inflation (33.9 percent in August), and a depreciating currency. To curb elevated inflation, the central bank raised the policy rates at three consecutive meetings to a record high.”
World Bank

The World Bank pointed out in its October 2022 Africa Pulse Report that the S&P Global Purchasing Managers Index (PMI) for Ghana dropped from 48.8 in July to 45.9 in August 2022— the lowest reading in 28 months.

“The subdued level of the PMI reflects private sector weakness— with activity being held back for seven straight months. New orders and output have been trending down for many months. Rising input costs, on the back of high fuel and raw material prices, compelled businesses to cut workers for the first time in about a year”.
World Bank

Non-resource-rich countries affected by the Russia-Ukraine conflict

The World Bank noted that the Non-resource-rich countries, of which Ghana is a member, are disproportionately affected by the Russia-Ukraine conflict owing to the deterioration in terms of trade as import bills rise.

Overall, output in these countries is expected to plunge by 0.8 percentage points to 3.9 percent in 2022. The World Bank further highlighted that the inflation outlook has deteriorated and current account deficits have widened in many countries, putting more pressure on the domestic currencies.

As a result, policy makers have reacted aggressively with contractionary monetary policy which weighs on economic activity, the report noted.

The average growth forecast among West African Economic and Monetary Union (WAEMU) countries is expected at 4.9 percent, down from 5.9 percent in 2021, and 0.2 percentage point lower than the April 2022 Africa’s Pulse forecast.

GDP growth is set to decline by more than 1.2 percentage points in Benin (5.7 percent), Burkina Faso (4.3 percent), Côte d’Ivoire (5.7 percent), Guinea-Bissau (3.5 percent), Mali (1.8 percent), and Senegal (4.8 percent), while a mild slowdown—less than 0.5 percentage point—will be observed in Togo (4.8 percent).

By contrast, growth in Niger is expected to jump by 3.6 percentage points to 5.0 percent on the back of expansion of the agriculture sector after a severe drought that dragged down growth in 2021.

According to the World Bank, investment in several infrastructure projects, particularly the construction of the oil pipeline and the Kandadji Dam, boosted growth on the demand side.

The sub-region is characterized by a twin deficit attributed to government interventions to contain inflation that has breached the regional target of 3 percent. Since the activation of the escape clause which allowed WAEMU countries to increase the government deficit above the convergence target of 3 percent, the consolidation process has been delayed to 2027.