Expanding industrial output, including from its extractive industries, helped Ghana maintain economic momentum throughout 2018, with the prospect of a similar performance in the coming year.
The economy registered positive growth in 2018, albeit at a slower rate than the previous year. Real GDP expanded at a rate of 5.4% year-on-year (y-o-y) in the first half compared to 7.8% in the same period of 2017, according to the 2019 budget statement, put before the Parliament in November.
Momentum picked up between July and September, with GDP registering the highest quarterly growth for the year, at 7.4% compared to 8.7% in 2017, according to a Ghana Statistical Service (GSS) report.
Industry was the fastest-growing sector, expanding by 10.4% and 11.1% in the first and second quarters, respectively, followed by 11.7% in the third. Of this, the mining and quarrying segment underpinned this performance, expanding by 28% and 24.7% in January-March and April-June, respectively, and 23.9% in July-September.
The results put the economy on track to grow by 7.9% in 2018, compared to 8.1% in 2017, according to remarks from President Nana Akufo-Addo in his New Year’s message to the nation, though final data from the GSS is not due to be released until March 2019.
In its latest global outlook report, the IMF forecast Ghana’s economy would continue to grow strongly, at 7.6%, in 2019.
See also: The Report – Ghana 2018
Inflation moderates, interest rate held at 17%
Inflation edged down through 2018, with the consumer price index (CPI) standing at 9.3% y-o-y in November, below the 11.8% year-end inflation rate for 2017 and the 10.6% peak posted in February, according to the GSS.
The food and non-alcoholic drinks component of the index rose by 8.6% y-o-y, up from 6.8% in January, but well below the 13.6% recorded in December 2017. It was the lowest rate seen since July 1992.
The slower rate of food price inflation was, however, offset in part by higher-than-average cost increases in some key non-food categories. While overall non-food inflation declined over the year, from 12% in January to 9.7% in November, transport costs – which include fuel prices – rose by 13.7%. Other above-average increases included the clothing and footwear component, at 12.6%, and miscellaneous goods and services, at 10.3%.
While the annualised inflation rate was within the Bank of Ghana (BoG) target for the year of 8% plus or minus two percentage points, in its latest monetary policy report issued December 28 the lender said it was nonetheless higher than hoped.
The bank therefore announced in November that it would maintain its benchmark lending rate at 17% for the third time in a row, after the first half of the year saw rates reduced by a cumulative three percentage points.
Good prospects for banking and hydrocarbons in 2019
Two sectors expected to see increased momentum in 2019 are banking, and oil and gas.
In September 2017 the BoG issued instructions for lenders to lift their minimum capital levels from GHS120m ($24.8m) to GHS400m ($82.9m) by December 31, 2018. The requirement for the 233% increase came after a series of banks became insolvent and were forced to shut down, with the BoG taking over their operations and rolling the failed lenders into Consolidated Bank Ghana.
While some banks had not met the mandated capital levels by the end of 2018, a total of 22 had done so, President Akufo-Addo said in a statement to the press in mid-December.
The banking sector overall posted stronger profits after tax due to lower costs, improved efficiency and higher levels of solvency, according to the BoG, though the level of adjusted non-performing loans stood at 11.4% as of October, up from 10.5% the previous year.
Meanwhile, oil and gas majors are set to be more active in 2019, with increased interest in newly offered fields.
At the end of December the government held the first open round of bids for exploration licences, with 16 companies including US-based ExxonMobil, France’s Total and Italy’s Eni submitting bids on a series of onshore and offshore blocks. Decisions on which bids will be accepted will be announced later in 2019.
The open bidding process replaces the earlier practice of awarding exploration and extraction rights through closed negotiations. The 60 bids lodged through the first open bidding round have served to underscore the increased interest in Ghana’s hydrocarbons potential, which should see a greater flow of foreign investment to the industry in the years to come.