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Ghana Country Risk Report 2016

Ghana Country Risk Report 2016

Core Views

An uptick in investor sentiment, the launch of the TEN oilfields andthe waning of the electricity crisis will lead to an uptick in real GDPgrowth in Ghana in 2016 following two years of macroeconomicturmoil. We forecast expansion of 4.9% and 5.8% in 2016 and 2017,respectively.

The November 2016 presidential and parliamentary elections inGhana will be closely contested between incumbent John Mahamaand primary challenger Nana Akufo-Addo. President Mahama willseek to present himself as strong on corruption and policy failurein the coming months, but cutting the fiscal deficit while retainingsupport will take careful balancing.

The Bank of Ghana's Monetary Policy Committee opted to leave itskey policy rate unchanged at 26.00% at its January meeting, indicatingto us that it has in fact reached the end of its hiking cycle. Wenow expect that rates will be maintained at current levels throughH1 before 100 basis points of cuts are enacted in the second halfof the year, taking the year-end policy rate to 25.00%.

The Ghanaian government is implementing some difficult reformsin 2016, which will help it to bring in the budget deficit even whilethe global price of oil – on which the government is becoming increasinglyreliant for revenues – is looking extremely weak. Thesenew tax measures will see the deficit continue to decline over thenext several years, so long as the government stands its ground –particularly as the November 2016 presidential elections approach.We forecast the shortfall will be equivalent to 6.4% of GDP in 2016,and 5.2% in 2017.

Ghana's current account deficit in 2016 and 2017 will be widerthan we had previously projected owing to a dimmer outlook for thecountry's primary commodity exports, oil in particular. We forecastthat the deficit will stand at 7.3% of GDP in 2016 and 6.9% in 2017,following an estimated 8.4% in 2015. While our expectation for adiminishing shortfall remains, the deficit will not be reduced as quicklyas we projected in our last quarterly report. We had expected thatthe deficit would fall from a projected 8.0% of GDP in 2015 to 6.9%in 2016 and 5.9% in 2017.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Growth Will Pick Up In 2016
An uptick in investor sentiment, the launch of the TEN oilfields and the waning of the electricity crisis will lead to an uptick in real GDP
growth in Ghana in 2016 following two years of macroeconomic turmoil. We forecast expansion of 4.9% and 5.8% in 2016 and 2017
respectively.
GDP By Expenditure Outlook
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Structural Reforms Will Narrow Budget Deficit
Ghana's budget deficit will decline over the coming years. While the fall in the oil price will dent revenues, the government is striving to
curb expenditure and widen the tax base under the guidance of the IMF.
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
External Trade And Investment Outlook
Current Account Will Be Hit By Oil Price Decline
Ghana's balance of payments will remain under considerable pressure in 2016 and 2017, and our outlook is less positive than it was
three months ago. This is primarily due to a renewed collapse in the oil price.
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS IMPORTS IN 2014
TABLE: TOP 5 GOODS EXPORTS IN 2014
Monetary Policy
Monetary Policy Normalisation Will Begin In H2
The Bank of Ghana will maintain rates through the first half of 2016, but slowing price growth will enable the bank to begin a
normalisation of monetary policy in the second half of the year.
Monetary Policy Framework
Chapter 2: 10-Year Forecast
The Ghanaian Economy To 2025
Oil To Boost Growth Over The Long Term
We hold a positive long-term outlook on Ghana's economy, forecasting that annual real GDP growth will average more than 6% over the
coming 10 years. The ramping up of domestic oil production will provide a significant impetus to the economy, allowing the mitigation of
fiscal and current account drags.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
2016 Presidential Election Will Be Closely Contested
The November 2016 presidential and parliamentary elections in Ghana will be closely contested between incumbent John Mahama and
primary challenger Nana Akufo-Addo. President Mahama will seek to present himself as strong on corruption and policy failure in the
coming months, but cutting the fiscal deficit while retaining support will take careful balancing.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Oil: A Critical Test For The Polity
Ghana's political risk profile is relatively favourable, especially in the context of West Africa. However, oil revenues will require careful
management, presenting a formidable test for the government over the coming decade.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Trade Procedures And Governance
TABLE: SUB-SAHARAN AFRICA – TRADE PROCEDURES AND GOVERNANCE
Vulnerability To Crime
TABLE: IMPORT AND EXPORT DOCUMENTS
TABLE: TRADE PROCEDURES BREAKDOWN
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Downside Risks Gather Momentum
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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