Ghana has been rated as the world’s fastest-growing economy according to the International Monetary Fund (IMF) World Economic Outlook according to a report on dw.com.
Ghana’s economy is skyrocketing. That is what the World Bank and the International Monetary Fund (IMF) predict for this year. The IMF talks of a growth rate of 8.8% in its World Economic Outlook, which would make Ghana the fastest growing economy in the world in 2019. Last year, the country’s economy grew by 5.6%, putting it in sixth position. Where does this new impetus come from? And in which sectors is Ghana doing particularly well?
Adu Owusu Sarkodie, from the University of Ghana, believes the main source of growth is the oil sector. “We have discovered new oil fields,” he told DW. “Companies have started operating,” he said. “They have intensified their operations.” In the list of the African countries growing most rapidly economically, Ghana is closely followed by its neighbor Ivory Coast, with 7.5%, and Ethiopia, with 7.7%. It is interesting that the growth rate from 2018 to 2020 of those two countries appears to be consistent, while Ghana’s growth is predicted to decline again in 2020.
“I think this is more a one-off,” Papa N’Diaye, head of the Regional Studies Division at the IMF’s African Department, told DW. “We don’t expect this growth rate to be sustained over the medium term. And, when you look at it per capita, that is still smaller than what countries like China have experienced in the past.” N’Diaye confirmed that Ghana’s economic growth is expected to slow to a level of about 4.5% to 5%.
A report on dw.com states that Oil is not the only factor driving Ghana’s economy. “The nonoil sectors, agriculture, manufacturing and services, they are also picking up. Now they are all growing positively,” Sarkodie said.
The agriculture sector has received a major boost over the past two years, thanks to a strong focus by policymakers on food and jobs. For example, 200,000 farmers received improved seeds and fertilizers. The sector remains a major backbone of Ghana’s economy. According to Agriculture Minister Owusu Afriyie Akoto, the program has led to a good harvest across the country. “We are expecting a bumper crop because of the impact that this great program has had on agriculture, even in its infancy,” he said
Winners and losers
Where there are winners, there are also losers. Angola comes in last on the list of African countries, with a predicted economic growth of just 0.4%. Last year it suffered a decline of 1.7%. South Africa is also far behind, with an expected growth rate of only 1.2%, an increase of 0.4% on 2018. Third from last is oil giant Nigeria, with a growth rate of 2.1%.
“These countries have been hit very hard by the decline in commodity prices,” N’Diaye said. “You have to go back to the 1970s to find something of similar magnitude. These countries are now slowly recovering but it will take some time. It also requires countries to implement reforms to diversify the economy and to boost private sector activity by removing some of the constraints that are the biggest impediments to growth, as well as restoring a better business environment.”
The IMF divides the 46 listed countries into three groups: oil exporters, middle-income countries and low-income countries. The group of oil exporters, with a growth rate of 2.0%, is doing less well than middle-income countries, with 3.4% and low-income countries, with 5.3%, a trend that could be observed in 2018, as well. In total, sub-Saharan Africa can register GDP growth of 3.5%. What makes this year’s prediction so interesting for Africa is that it is an African nation that seems to be the economic front-runner, ahead of international heavyweights such as China in India.
Ghana is the world’s second-biggest producer of cocoa, which is probably also a reason why the West African country is the continent’s and the world’s leader when it comes to increased economic strength. But, unlike in the agricultural sector, in which a lot of Ghanaians are playing a role, investments in the mining and oil sectors have been largely foreign-led. According to Sarkodie, this is a problem, even though these investments have a long-term effect.
“My major concern has to do with the source of growth,” he said. “The GDP is a domestic product: It doesn’t matter what is produced by foreigners or Ghanaians. But we know that in Ghana most of our companies are foreign-owned.” This means, Sarkodie said, that “the impact on Ghanaian lives will be minimal.”
Digitize the economy
To be able to attract investors, countries need well-designed reforms to assure entrepreneurs of returns. That is what Ghana has been trying to do. Three years ago, the government secured a loan from the IMF of $925.9 million. The arrangement, which ended in early April, aimed to restore debt sustainability and macroeconomic stability in the country in order to foster a return to high growth and job creation while protecting social spending. Several economic reforms, including reducing the budget deficit and cutting down on corruption, were rolled out. According to Ghana’s finance minister, Ken Ofori-Atta, some of these measures have repositioned the economy: “Inflation is at a single digit, which is good. The growth has been strong, 6% through the third quarter of last year. Our budget deficit has gone down and we are also getting surpluses in our current account.”
Sarkodie agrees that Ghana’s domestic economic management has been on the right track. “We went into the IMF program seeking policy credibility; in fact, at the time we went to the IMF program, things were very bad. Now, all the macroeconomic indicators look good. Inflation is down, the exchange rate is a bit rough now, but I am sure it will be stabilized,” he said.
What needs to happen now is that conditions for the high growth rate to be sustained are created, N’Diaye. “And that means containing vulnerabilities. That means boosting private sector activity, making sure that the private sector is leading growth. And it also requires making growth inclusive because that’s one of the key requirements for sustaining a high growth rate for a long period of time.”
Ghana is now looking to boost technological innovations and get more young people involved in sustaining and improving the country’s economic performance.
Isaac Kaledzi contributed to this report.