Economic growth in Ghana in 2016 will improve on last year, but will remain below its 10-year average due to tight monetary and fiscal policy. The tighter reins on the economy will build a solid platform for more sustainable growth from 2017 onwards, when we expect that Ghana will become a regional success story once more.
Ghana's delayed 2016 eurobond issuance will make an appearance later in the year, as an integral part of the government's fiscal consolidation programme. The budget deficit will come down this year, but the slump in the oil price will necessitate more borrowing than previously envisaged.
Ghana's current account deficit will narrow over the next several years, but will remain wide as the country's primary exports struggle. Low oil prices in particular will weigh on the balance this year.
Persistently high inflation and a hawkish tone from the central bank's communiques has led us to the conclusion that Ghana's rate-hiking cycle is not yet over, and that the new central bank governor will continue his predecessor's work. We forecast a further 100 basis points of hikes at the next monetary policy committee meeting.
If the government fails to abide by the IMF's conditionality following the deal finalised in early 2015, investor sentiment will sour severely.
The Ghanaian cedi remains vulnerable amid the sizeable current account deficit and could depreciate more swiftly than we anticipate.
Mismanagement of oil revenues - perhaps stemming from insufficient institutional capacity - could dent investor perceptions.
|e/f = BMI estimate/forecast. Source: National Sources|
|Nominal GDP, USDbn||35.4||36.2||39.7||46.2|
|Real GDP growth, % y-o-y||4.0||3.4||4.2||6.7|
|Consumer price inflation, % y-o-y, eop||17.0||17.7||16.0||13.6|
|Exchange rate GHS/USD, eop||3.22||3.81||4.23||4.46|
|Budget balance, % of GDP||-6.3||-7.2||-6.4||-5.0|
|Current account balance, % of GDP||-9.4||-8.4||-7.5||-7.0|
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