Ghana’s economy likely to recover fully in 2024 - Standard Bank
Economic analysts at Standard Bank, the parent company of
Stanbic Bank Ghana, have indicated that Ghana’s economy is likely to see a full
recovery in 2024 due to the impact of COVID-19. This was contained in the May
2020 edition of the bank’s African Monthly Report (AMR).
According to the report, the 6–8 percent year-on-year growth
that seemed reasonable at the beginning of the year is no longer likely.
“COVID-19 undoubtedly will affect economic growth
meaningfully. Whereas growth of 6% – 8% y/y in the next 2 – 3 years seemed
reasonable before, now 1.0% y/y seems likely this year, with a recovery only
next year. In our base case, we see economic growth topping 5.0% y/y only by
2022,” the report said.
The report further indicated that the economic situation
will make it difficult for the government to control the fiscal gap, which will
in turn affect the strength of the local currency.
The report noted that “Our bear scenario sees an economic
contraction this year, then recovering to over 5.0% y/y growth by 2024. In this
scenario, the government would find it hard to arrest a widening fiscal
deficit, triggering significant portfolio outflows that would lead to faster
depreciation of the Ghana Cedi than in our base scenario”.
Furthermore, the report indicated that the fall in oil
prices will further undermine long-term economic growth particularly because
oil revenues are a significant part of government revenue.
According to the report “Naturally, given the oil price
collapse, and the flux in that market, Ghana’s oil production will be
restrained too. A significant source of uncertainty is how long oil prices will
remain as depressed. The longer so, the greater the likelihood that investment
in the oil sector will dwindle, undermining long-term growth”.
The report continued that “Oil revenues are a significant
source of government revenue, at 5.5% of total revenue, with dividends from oil
accounting for an additional 6.8% of revenue. Also, consider the service
suppliers to the oil industry. Were oil prices to remain depressed for long,
overall economic activity would suffer”.
These conditions notwithstanding, the report predicts less
pressure on inflation this year and foresees the Central Bank’s Monetary Policy
Committee easing its policy stance in a bid to boost economic activity. The
report also sees strong official financial inflows, which will likely leave the
country’s balance of payment in a healthy position this year despite pressure
on the current account.
The African Markets Report is a monthly report issued by the
Standard Bank Group, the parent company of Stanbic Bank Ghana and focuses on
the economic and financial outlook of African countries. The report also
reviews current economic situations and makes short to medium-term predictions
about the economies of African countries.
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