Ghana: Economic and Political Overview

Economic Indicators

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Ghana was consistently placed among Africa’s ten fastest-growing economies before the economic recession induced by falling oil prices and the Covid-19 pandemic, but this trend has changed. After rebounding to 5.4% GDP in 2021, economic growth slowed down to 3.6% GDP in 2022, in the context of the global economic shock caused by the war in Ukraine. According to IMF estimates, GDP growth is expected to further decrease to 2.8% in 2023 before increasing to 3.9% GDP in 2024. Lower oil prices and production level, fiscal and debt vulnerabilities and a challenging external environment will impede growth prospects.

In 2022, Ghana’s economy, still recovering from the impact of the Covid-19 pandemic and the collapse in export revenues from oil and cocoa, was further hit by the consequences of the war in Ukraine. Public debt increased from 82.1% GDP in 2021 to 90.7% GDP in 2022, and investors’ concerns triggered credit rating downgrades, capital outflows, loss of external market access, and rising domestic borrowing costs (IMF). The debt is driven in part by exceptional energy and financial sector costs. Indeed, government arrears to the energy sector represent 1% of GDP each year (Coface). Debt interests payment weights heavily on the fiscal deficit, despite higher tax revenue and external demand for oil, gold and cocoa. Budget deficit decreased from -11.4% GDP in 2021 to -9.2% GDP in 2022, and while it is expected to further reduce, it will remain high in 2023 (-8.6% GDP), and 2024 (-8.9% GDP) (IMF). The price and supply-chain shocks caused by the war in Ukraine exacerbated the situation, leading to a large exchange rate depreciation, a surge in inflation and pressure on foreign exchange reserves (IMF). From 10% in 2021, inflation soared to 27.2% in 2022, and while declining, it is expected to remain very high in 2023 (20.9%) and 2024 (14.7%) (IMF). In December 2022, it reached 54.1% (Focus Economics). In December 2022, the IMF team reached staff-level agreement with the Ghanaian authorities on a three-year program supported by an arrangement under the Extended Credit Facility (ECF) in the amount of USD 3 billion. The program aims to restore macroeconomic stability and debt sustainability while laying the foundation for stronger and more inclusive growth. In February 2023, the government closed its domestic debt restructuring program, shifting maturities to 2028 from 2023 and reducing coupon rates (Focus Economics). Talks have been initiated with Paris Club members regarding external debt restructuring. According to IMF estimates, public debt will remain as high as 87.8% GDP in 2023 and 89.2% GDP in 2024. The Ghanaian authorities have committed to a wide-ranging economic reform program, which builds on the government’s Post-COVID-19 Program for Economic Growth (PC-PEG) (IMF). The government also remains committed to the Energy Sector Recovery Programme (2019-2023) established in collaboration with the World Bank.

Ghana is facing high inequalities, increasing poverty and unemployment. The country was ranked 133rd in the 2021 Human Development Index. According to World Bank estimates, unemployment rate in the country was around 3.9% in 2021.

Main Sectors of Industry

Ghana, Africa’s largest gold producer, is rich in natural resources and benefits from a fertile soil. Agriculture represents 19.7% of GDP (World Bank), and employs 30% of the country’s workforce. Arable lands cover approximately 57% of the country's total land area (FAO). Most of the cultivated lands (95%) consist of small and medium-sized farms (up to 10 hectares). Crops vary considerably depending on the region. In the forest zone (southwest), tree crops, including cocoa, oil palm, coffee and rubber, are common. Maize, legumes, cocoyam or yam, with tobacco and cotton are among the most harvested crops in the middle belt of the country. Tobacco and cotton are also harvested in the north of the country, in addition to sorghum, millet, cowpeas and groundnuts. While livestock production is important, particularly in the north, Ghana still imports meat and dairy products to meet demand.

Industry accounts for 28.3% of GDP and employs 21% of the workforce. It is dominated by mining, lumbering, light manufacturing, aluminium smelting, food processing, cement production, small commercial ship building and petroleum. Gold, bauxite and manganese mining plays a key role thanks to the country's rich subsoil resources. Rich bauxite reserves coupled with high hydro stocks provide strong potential for aluminium smelting. Ghana also has a relatively sophisticated automotive industry and exports cars to other parts of Africa.

The service sector is the largest component of the economy comprising 45.9% of GDP and employing 49% of the workforce (World Bank). The banking sector has developed and modernized in recent years but has more room to grow. Telecommunications is the main service sector due to a rapid growth of mobile phone users and the emergence of mobile payment technologies.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	29.8	21.0	49.2
Value Added (in % of GDP)	19.7	28.3	45.9
Value Added (Annual % Change)	8.4	-0.8	9.4

Source: World Bank - Latest available data.

 

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Monetary Indicators	2016	2017	2018	2019	2020
Ghanaian Cedi (GHS) - Average Annual Exchange Rate For 1 MUR	0.11	0.13	0.14	0.15	0.14

Source: World Bank - Latest available data.

 

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:

59,2/100

World Rank:

101

Regional Rank:

11

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

 

Foreign Trade in Figures

Ghana is very open to foreign trade that represented 58% of GDP in 2021 (World Bank). The government wants to create an economic environment that facilitates the development of the private sector thus guarantying transparent trades and promoting competitiveness in foreign markets. Ghana mainly exports gold and other ore and gems, petroleum oil, cocoa, nuts, woods, fish, and vegetable oils. The country mainly imports machinery, vehicles, petroleum oils, iron, electrical products, plastics, cereals and other food products, medicines and capital goods (ITC, 2021).

Ghana is a member of the World Trade Organisation and of the ECOWAS. It has also signed numerous partnership agreements, including with the EU. The European Union also supports the Ghana “Beyond Aid” program aimed at reshaping trade dynamics between the country and developed economies. Customs duties are not high but they are applied to every imported product. Ghana is using the common external customs tariffs of the ECOWAS. The import of some products such as mercury soap, hazardous wastes or contaminated products is prohibited.

Ghana's main clients are China, Switzerland, India, South Africa, and the Netherlands. The Netherlands is its main client for horticultural products. Ghana's main suppliers are China (18.2% of total imports), the United States, the United Kingdom, India and Belgium (ITC, latest data available).
 
According to WTO data, in 2021 Ghana exported goods for a total value of USD 14.73 billion while it imported goods with a total value of USD 13.63 billion. Regarding services, Ghana exported USD 9.17 billion worth of services while it imported 12.34 billion worth of services. In March 2022, the merchandise trade surplus reached an all time high of USD 676.21 million (Bank of Ghana).

Sources of General Economic Information

Ministries

Ministry of Finance
Ministry of Trade and Industry
Ministry of Energy

Statistical Office

Ghana Statistical Service

Central Bank

Bank of Ghana

Stock Exchange

Ghana Stock Exchange

Search Engines

Ghana Web
Google Ghana

Economic Portals

Ghana Trade

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