Fitch Solutions in its report has disclosed that fixed investment in Ghana will expand by 1.3% in 2023, below the 2015-2019 average of 2.7%, contributing 0.3 percentage points to the headline growth.
Fitch Solutions attributed this to tighter financial conditions, which will further dampen activity in the real estate and construction industries, putting downward pressure on fixed investment growth this year.
“Fixed investment will remain subdued due to constrained access to credit amid tighter monetary conditions and the domestic debt restructuring programme. Public investment spending will also remain weak as the government reins in spending.”Fitch Solutions
Since late 2021, the Bank of Ghana (BoG) has hiked the policy rate by 1,500 basis points to 29.50%, making it one of the world’s most hawkish central banks.
This, as stated by Fitch, will limit private-sector loan availability, possibly postponing company investment plans and weighing on fixed capital formation throughout the course of the year.
“Banks will face significant pressure on their balance sheets due to Ghana’s domestic debt restructuring programme, weakening their ability to issue loans to corporates as well as the government.”Fitch Solutions
Fitch also disclosed its expectation that, government consumption will fall as a result of fiscal austerity measures implemented as part of Ghana’s $3 billion International Monetary Fund program.
More so, according to Fitch, fiscal austerity efforts and still-elevated inflation will erode consumers’ purchasing power and weigh on private consumption over the year, adding that “middle- and high-income households will forgo some of their investment income following the domestic debt swap.”
Fitch Solutions Maintains 2.9% Growth Rate Forecast For Ghana 2023
Meanwhile, it can be recalled that Fitch Solutions maintained its 2.9% Gross Domestic Product (GDP) growth rate for Ghana in 2023, despite the International Monetary Fund and the World Bank all forecasting below 2.0% expansion of the economy.
According to the research and market information firm, the expected growth rate will remain below the five-year pre-pandemic average of 5.3%.
In its latest report in Ghana dubbed “Ghanaian economy will underperform in 2023 and 2024”, Fitch Solutions revealed that the new taxes introduced as part of the International Monetary Fund programme will exert downward pressure on purchasing power and thereby weakening the outlook for private consumption.
Fitch stressed that while a more stable exchange rate and moderating global commodity prices will see price growth moderate over the coming quarters, inflation will remain sticky to the upside as tax increases will result in further upward adjustments to consumer prices.