Ghana’s economic trajectory throughout the previous decade has been positive, with growth peaking at 13.9% in 2011 on the back of strong oil revenue from the offshore Jubilee Field and solid performance in the gold and cocoa export markets. It has not been entirely smooth sailing during that time, however, with multiple bailout agreements signed with the IMF, the most recent a $3bn extended credit facility (ECF) agreement approved in May 2023.
Like many economies, Ghana was heavily impacted by the Covid-19 pandemic. Besides the economic and human cost, it added to the public debt, which grew further in mid-2022 following the dual external shocks of Russia’s invasion of Ukraine and the US Federal Reserve’s tightening of monetary policy. This led to a depreciation of the Ghanaian cedi, declining foreign currency reserves and high inflation in Ghana and other emerging markets. The cedi has regained much of its value against the US dollar since its low in November 2022, with inflation reaching 42.2% in October 2023 on a year-on-year (y-o-y) basis.
Despite macroeconomic challenges, based on sectoral contributions Ghana has seen strong economic fundamentals. The country regained its spot as Africa’s largest gold exporter from South Africa in 2023, is the world’s second-largest producer of cocoa and was one of the few countries not to enter a recession during the pandemic. In the long term, Ghana is set to benefit significantly from the African Continental Free Trade Area (AfCFTA), as well as other structural benefits such as a young population and a stable political environment, which is notable when contrasted with many of its ECOWAS neighbours.
Structure & Oversight
The economy is overseen directly by the government, particularly the Ministry of Finance (MoF), headed by Mohammed Adam and the Ministry of Trade and Industry, headed by Kobina Tahir Hammond. Individual sectors are overseen by relevant ministries, such as the Ministry of Energy and Petroleum for energy; the Ministry of Communications and Digitalisation for ICT; the Ministry of Food and Agriculture for agricultural production and foodstuffs; and the Ministry of Transport for transport, infrastructure and general connectivity.
Founded in 1957, the same year as Ghana’s independence from the UK, the independent Bank of Ghana (BoG) oversees the country’s monetary policy, promotes the stabilisation of the currency and regulates the credit system, among other key roles such as the promotion of financial inclusion. The Monetary Policy Committee is tasked with outlining the BoG’s monetary policy, pursuing an inflation-targeting policy of 8%, plus or minus two percentage points. However, given macroeconomic challenges since 2022, the country’s inflation rate has been substantially higher, standing at 35.2% as of October 2023.
In terms of inward investment flows, the trade promotion and investment space is overseen by the Ghana Investment Promotion Centre (GIPC), which was created in 2013. Aside from mining and petroleum investment promotion, which are overseen by other entities, the GIPC facilitates investment in 12 sectors by offering investment promotion, investment facilitation, investor advocacy and aftercare services, as well as acting as the first point of call for the majority of foreign investors.
Performance
Prior to the pandemic Ghana’s economy was performing strongly, with growth of 8.1%, 6.2% and 6.5% recorded in 2017, 2018 and 2019, respectively, according to the IMF. Ghana avoided recession during the pandemic , growing by 0.5% in 2020. This rebounded to 5.4% in 2021, buoyed by a recovery in commodity prices and positive foreign investment flows. Growth slowed to a more modest 3.2% in 2022 in the face of challenging macroeconomic conditions. Although the IMF forecasts a somewhat sluggish growth rate of 1.2% for 2023, Ghana’s economy is expected to expand by 2.7% in 2024 and 4.6% in 2025. Given the high prices of commodities in 2023, non-extractive GDP is expected to grow by 0.7% that year, while extractive GDP is set to grow by 6.1%. In contrast to the IMF’s growth prediction of 1.5% for 2023, in September of that year Ernest Addison, the governor of the BoG, stated that he predicted GDP would expand by 3% due to stronger-than-expected economic growth year to date.
In light of the challenging fiscal situation, in May 2023 the IMF approved a $3bn ECF arrangement for Ghana, with around $600m available for immediate disbursement. The remaining money is set to be provided in six-month intervals during the duration of the three-year arrangement. The ECF is dependent on a number of actions by the government in the form of an economic programme with three key objectives: restoring macroeconomic stability, ensuring debt sustainability and laying the foundations for stronger, more inclusive growth.
Monetary Policy
In 2023 the BoG adopted a cautious monetary policy with a view to supporting economic stability and growth, as well as to control inflation, which hit a record 53.6% in January of that year. It also intervened to reduce the cedi’s volatility and prop up the currency. The BoG’s interest rate hikes began in 2021, long before many advanced economies, with its latest move to tighten fiscal policy occurring in July 2023, when it raised rates by 50 basis points to 30%. The bank has openly called for tighter fiscal policy from the government to curb inflation, which could help avoid further monetary tightening in the future. In its September 2023 meeting, the BoG decided to leave rates at 30%, citing stronger-than-expected economic growth, lower inflation and more stable exchange rates.
Fiscal Policy
As with many countries around the world, the pandemic led to greater government spending to support segments of the population and sectors of the economy that suffered most from the pandemic and associated lockdowns. The government spent 1.8% of GDP to cover water and electricity bills, as well as provide loans and credit facilities to its citizens, among other initiatives. A further 0.5% of GDP was spent on health care provision.
Although these measures were widely considered necessary during the pandemic, they added to Ghana’s debt burden. As a result, the country’s public debt increased from 62.6% of GDP in 2019 to 78.9% in 2020, while the fiscal deficit increased from 7.5% of GDP to 15.2% during the same timeframe. From late 2022 Ghana’s government implemented a prudent fiscal policy in the face of macroeconomic headwinds to demonstrate a balance between fiscal discipline and targeted spending on sectors vital to both the economy and society.
In the 2023 budget the government signalled the need for fiscal consolidation through measures such as boosting tax revenue by increasing the value-added tax (VAT) rate by 2.5 percentage points, removing selected VAT exemptions and making reforms to electronic levies to close loopholes. This was in conjunction with efforts to streamline expenditure following reviews of government spending across numerous departments.
While the country defaulted on its external debt in December 2022, it is working to restructure much of its external and domestic debt through programmes such as the Domestic Debt Exchange Programme (DDEP), and negotiations with the Paris Club and China. As of February 2023 the Ministry of Finance reported that 85% of eligible bondholders had registered for the DDEP, which paved the way to its deal with the IMF in May of the same year. The second phase of the DDEP will include US dollar bonds, cocoa bills and some pension fund-owned debt. The country’s external debt stock was GHS271.7bn ($28.4bn) as of the third quarter of 2022, according to MoF figures, with $20bn of that targeted for restructuring.
A July 2023 World Bank report shared a number of key recommendations on how the country should move forwards with its fiscal policy. It advised the government to increase domestic revenue sustainably, streamline tax incentives and enhance revenue administration. It suggested tighter spending controls to improve budget accuracy and prevent new arrears. The World Bank emphasised the need to address the country’s energy sector shortfalls, a crucial step towards fiscal stability, urging the accelerated implementation of the Energy Sector Recovery Programme (see Energy chapter).
Moreover, rebuilding the financial sector’s capital buffers is vital for the country’s stability due to eroded bank capital since the pandemic. The institution also recommended that the government improve transparency and regulatory governance to boost foreign investment inflows. Lastly, it advocated for cost-effective resilience investment to combat climate change, as stated in the World Bank’s “Country Climate and Development Report”.
Subsectors
Ghana’s varied economic make-up means the growth trajectories of individual sectors often differ considerably, given localised and isolated factors influencing growth in different parts of the economy. Within the services sector, which posted a 6.3% y-o-y growth rate during the first half of 2023, a number of subsectors recorded especially robust growth rates. Those included public administration, defence and social security, at 37.6%; health and social work, at 31.6%; education, at 26%; and information and communication, at 18.9%. Industry posted a contraction of 2.2%, with mining shrinking by 2.9% and manufacturing by 2.5%. Agriculture, however, grew by 6.3% on the back of high global food prices. In terms of overall composition, as of the second quarter of 2023 GDP comprised 46.1% services, 32.5% industry and 21.4% agriculture. As of 2022, 23.7% of GDP was in the informal sector, down from a peak of 29% in the first quarter of 2020.
Trade
Ghana’s capital Accra hosts the Secretariat of the AfCFTA, which was formally handed over to the African Union in August 2020 after the agreement came into force in May 2019. Although the start of trading began on January 1, 2021, the first major trade under the AfCFTA regime took place in July 2023, with a shipment of resin from Tunisia to Cameroon benefitting from a reduction in Customs tariffs. As of October 2023, 47 of the 54 signatories had deposited their instruments of ratification, with Eritrea being the only country on the continent that is yet to join. Despite delays in implementation, expectations for the trade bloc are high. UN forecasts predict that the agreement could increase intra-Africa trade from the current 14.4% of total exports to 33% while reducing Africa’s total trade deficit by 51%. In Ghana, businesspeople also see the benefits of gaining tariff-free access to a continent-wide trade bloc with a total GDP of $3.4bn.
“The arrival of the AfCFTA has opened up new markets to Ghanaian companies looking to trade with more countries across the continent,” Sjoerd Grueter, managing director of Crocodile Matchets, a subsidiary of Ralph Martindale Group that manufactures agricultural tools, told OBG. “Now that the trade bloc is in force, there is ample optimism for boosting trade and commerce flows across the continent in the coming years.”
Ghana’s top exports by value are gold, representing 37.5% of exports in 2022; mineral fuels and oils, at 30.6%; cocoa beans and derivatives, at 12.4%. In 2022 mineral fuels and oils constituted 26.8% of all imports, followed by machinery and electrical equipment, at 13.3%, and chemical products, at 10.7%. Given that Ghana produces many imported items in some form, such as petroleum and rice, reducing export dependence on these products even marginally could free up currency reserves for imports of other goods that Ghana does not produce. There has been progress in this area, with the trade deficit in decline, from 10.7% of GDP in 2010 to 8.7% in 2015 and an estimated 2.6% in 2022.
When examining the country of origin of Ghana’s imports, in 2022 China provided the bulk of imports, at a value of some GHS24.6bn ($2.2bn), with the UK next in line, followed by the Netherlands, the US and India. Exports were headed by Switzerland, which accounted for a value of GHS26.1bn ($2.4bn), while China, Canada, South Africa and India each received between GHS18.2bn ($1.6bn) and GHS14bn ($1.3bn) worth of exports in 2022.
Investment
According to the GIPC, during the first half of 2023 the majority of investment in Ghana flowed to the manufacturing sector, totalling some $156.2m, followed by the services sector, at $38m, and export trade, at $27.6m. China was the leading source of foreign direct investment, with $120m, followed by the US, with $19.5m; the Netherlands, with $16.9m; and Australia, with $14.4m. When measured in number of projects, China tops the list with 16, followed by the US, with nine, and the Netherlands and India, with seven and five, respectively. Geographically, 63 projects were located in the Greater Accra Region, with seven in the Ashanti Region in the west, two in the Upper East Region in the north-east and one in the Western North Region. This demonstrates that, despite ongoing efforts to decentralise growth away from the capital, Accra continues to be the primary draw for investors in the country, given its transport links, access to human capital and developed infrastructure.
Human Capital
Ghana’s labour market has faced challenges following the pandemic, such as closing the skills and gender gaps in the workforce. Unemployment remains high, especially for young people, and there is a shortage of qualified workers in certain industries, particularly tech (see Health & Education chapter). As the digital economy grows, so does the need for qualified individuals, with trainees often earning double or triple the market rate. More broadly, a report from the Ghana Statistical Service showed that around two of out every three unemployed people in Ghana are women, with this figure higher in urban areas than in rural ones.
In the third quarter of 2022 the total employment rate was 13.7%, at 10.1% for males and 16.6% for females. This rose to 16.2% for the rural population, at 12.4% for males and 19.1% for females. Most employment in Ghana is in the informal sector. Between the first and second quarters of 2023, 155,000 people transitioned from the formal to the informal sector and remained there in the third quarter. Almost 90,000 people reversed that trend by transitioning from the informal to the formal sector over the same timeframe. As digital platforms boost financial inclusion, it is hoped that there will be a more steady flow of workers into the formal sector.
Digital Economy
ICT has consistently been one of the best-performing sectors of the economy, growing by an average of 19% annually in 2014-20 (see ICT chapter). The pandemic accelerated the digitalisation of the country’s economy in ways not previously envisaged. One cornerstone of this was the government’s Ghana Covid-19 Alleviation and Revitalisation of Enterprises Support (CARES) programme, launched in November 2020. CARES sought to develop the digital economy by digitalising public records and revenue collection, supporting a cashless society as well as boosting the capacity and capability of online education platforms. Investment in the national fibre network to bolster internet connectivity was made a key policy priority, alongside the construction and planning of tech centres to support further ICT growth and key industries such as business process outsourcing.
These measures will help to boost overall productivity, especially among small and medium-sized enterprises (SMEs). In Ghana, SMEs make up 90% of all businesses and account for around 70% of GDP. Although 42% of Ghanaians above the age of 15 have a bank account, mobile wallet penetration is over 100%, underscoring the appetite for digital payment services. According to the BoG, total mobile money transactions in the first quarter of 2023 reached GHS411.5bn ($37.4bn) representing a 69.1% increase y-o-y. Adoption of digital payment solutions has been one of the key drivers in reducing the unbanked population from 60% in 2014 to 32% in 2021.
The country is continuing to pursue digital infrastructure development to address remaining gaps. In much of Ghana outside the major cities, 2G and 3G are commonplace. Given the link between economic growth and mobile connectivity, greater investment in 4G and 5G would help to bolster connectivity, and therefore economic growth, more evenly across the country. In April 2022 the World Bank provided Ghana with a $200m loan to accelerate its digital transformation. The Ghana Digital Acceleration Project seeks to bolster digital innovation and digital inclusion, improve e-governance and overall delivery of public services, and increase smallholder engagement through data-driven digital agriculture. This will enable greater digital adoption across the whole economy by combining top-down, supply-side initiatives with bottom-up, demand-side programmes.
Outlook
In a challenging era for many countries in Africa, Ghana stands out for its stability and effective governance, creating an attractive environment for both domestic and foreign investment. Strong commodity prices will lead to increased foreign currency earnings through petroleum and mining, as well as agricultural exports. The government’s commitment to economic diversification and infrastructure development should stimulate job creation and productivity. On a regional level, Africa-wide economic integration through initiatives such as the AfCFTA positions Ghana as a gateway to the African market, opening up vast opportunities for trade and