The International Monetary Fund (IMF) is the latest institution to cut Ghana’s growth rate for 2022 amid the difficulties facing the global and domestic economies.
The Fund lowers the country’s growth forecast to 3.6%, 1.6 percentage points lower than the earlier 5.2% projected.
In its Economic Outlook Report, the Fund expressed worry that countries like Ghana will be affected by happenings in other developed economies as growth in those countries are expected to contract.
The Bretton Woods Institution warned that moves by Central Banks in developed countries to check inflation with further tightening of monetary policies will impact on economies like Ghana, as well as developments in Russia and Ukraine.
Few weeks ago, sister Bretton Woods Institution, the World Bank, in its Africa Pulse Report, projected that Ghana will end 2022 with a growth rate of 3.5%.
The World Bank is also projecting that Ghana’s Debt-to-GDP Ratio will hit 104.6% at the end of 2022, up from 76.6% in 2021.
Strong growth in Q2, 2022
The revision in the country’s GDP growth came despite a strong growth of 4.8% recorded in the second quarter of 2022 compared with 4.2% recorded in the second quarter of 2021.
Data from the Ghana Statistical Service showed that the expansion in the second quarter of this year is higher than the 3.4% recorded in the first quarter.
In Q2, 2022, Non-oil GDP grew slower at 6.2 percent against 6.6 percent growth in the same comparative period. The relatively strong growth recorded in the second quarter was largely driven by the service and industry sectors, the latter bolstered by the manufacturing sub-sector.
Some of the growth numbers for some specific sub-sectors included: Manufacturing (8.8%), Crops and Cocoa (4.5%), Mining and Quarrying (4.4%), Information and Communication (12.4%) as well as Education (13.2%) sub-sectors.
However, the recent projections by the IMF and World Bank fall in line with the government’s expectations for the rest of the year. Despite hopes of GDP rebounding at 5.8 percent as earlier projected for 2022 before the commencement of the year, Finance Minister, Ken Ofori-Atta, announced that government has revised its growth to 3.7 percent for 2022 to reflect the plethora of economic difficulties facing the country.
The IMF in the World Economic Outlook Report, however forecast that economic growth in 2023 will slow down to 2.8% and peak strongly in 2027, reaching 6.8%.
IMF’s Economic Outlook Report
The Economic Outlook Report, which was titled ‘Countering the Cost of Living’, also warned that the worse is yet to come, warning that countries could face challenges.
“Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades.
“The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic.”
IMF
The latest Bank of Ghana high frequency indicators signaled some moderation in economic activity. The Composite Index of Economic Activity (CIEA) recorded an annual growth of 0.5 percent in July 2022, compared to 1.6 percent in June 2022, and 5.0 percent in December 2021. The sources of the slowdown were from construction and port activities.
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