Ghana Country Risk Report Q1 2016
Real GDP growth in Ghana will accelerate in 2016 and 2017 as the economy recovers from the economic morass it has been in over the past two years. Increasing oil production, improving electricity generation and diminishing deficits will be the root causes of this.
Another hike to Ghana’s key policy rate on September 14, a hawkish communiqué and still-high inflation augur for further monetary tightening, and we now expect that there will be an additional 100 basis points (bps) hike to the policy rate before year-end – implying 26.00%, the highest rate since 2003. This is indicative of the macroeconomic troubles Ghana is undergoing, and the authorities’ determination to bring inflation under control at whatever cost.
Ghana’s current account deficit will begin to diminish in 2016, despite ongoing price weakness for the country’s key commodity exports.
A ramp-up in oil exports and import-limiting currency weakness will offset ongoing falls in prices.
There will be some increase in public spending by Ghana’s ruling National Democratic Congress government in the run-up to the 2016 elections, but not to a level that should concern investors.
A weak political opposition and the high costs involved in failing the IMF programme mean that a massive increase is unlikely.
Ghana has issued its third eurobond at a yield of 10.75%. This will help support the currency, preventing what would have been a likely sell-off of the cedi had the authorities delayed the issuance any further, and help cover the budget and roll over short-term debt.
However, while the eurobond is cheaper than short-term borrowing, the debt will be far more costly to Ghana than previous issuances; its 2026 bond issued last year launched at a rate of 8.20%.
- Executive Summary
- Core Views
- Key Risks
- Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Investors Need Not Fear Ramp-Up In Pre-Election Spending
- There will be some increase in spending by Ghana's NDC in the run-up to the 2016 elections, but not to a level that should concern
- investors. A weak political opposition and the high costs involved in failing the IMF programme mean that a massive increase is unlikely.
- 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 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Emerging From The Macroeconomic Morass In 2016
- Real GDP growth in Ghana will accelerate in 2016 and 2017 as the economy recovers from the economic morass it has been in over
- the past two years. Increasing oil production, improving electricity generation and diminishing deficits will be the root causes of this.
- GDP By Expenditure Outlook
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- Monetary Policy
- Further Rate Hike To Come In November
- We forecast that there will be another rate hike in Ghana in November, taking the year-end policy rate to 26.00%. The latest hike, a
- hawkish communiqué, and persistent inflationary pressures point to further tightening.
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- TABLE: MONETARY POLICY
- External Trade And Investment Outlook
- C/A Will Narrow Despite Commodity Price Weakness
- Ghana's current account deficit will begin to diminish in 2016, despite ongoing price weakness for the country's key commodity exports.
- A ramp-up in oil exports and import-limiting currency weakness will offset ongoing falls in prices.
- TABLE: CURRENT ACCOUNT
- Fiscal Policy And Public Debt Outlook
- Latest Eurobond Launch Indicative Of Deteriorating Conditions
- Ghana's latest eurobond was issued with a yield of 10.75%, making it a far more costly debt than its previous issuances. This reflects
- ongoing fiscal troubles in Ghana, and deteriorating market conditions for SSA borrowers generally.
- Chapter 3: 10-Year Forecast
- The Ghanaian Economy To 2024
- Oil To Boost Growth Over The Long Term
- We hold a positive long-term outlook on Ghana, forecasting that annual real GDP growth will average more than 6.0% over the
- coming 10 years. The ramping up of domestic oil production will provide significant impetus to the economy, allowing the mitigation of fiscal and current account drags.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- TABLE: OPERATIONAL RISK
- TABLE: SUB-SAHARAN AFRICA - EDUCATION RISK
- TABLE: PUBLIC UNIVERSITY ENROLMENT
- Government Intervention
- TABLE: SUB-SAHARAN AFRICA - GOVERNMENT INTERVENTION RISK
- TABLE: PERSONAL AND INCOME TAX BRACKETS
- Chapter 5: BMI Global Macro Outlook
- Global Outlook
- Exit The Dragon
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %