Ghana will become a Sub Saharan Africa regional outperformer this year, as economic recovery is likely to gather pace for the rest of the year.
According to Fitch Solutions latest Sub Saharan Macroeconomic Update, majority of African countries including Nigeria and South Africa will however record recession.
The comprehensive report indicates that both consumer and business confidence are rising, after the further easing of covid-19 restrictions.
This affirms the Bank of Ghana’s recent survey that the pace of economic activity is picking up, whilst business and consumer confidence are increasing.
The global economy is expected to grow negatively this year, following the impact of covid-19.
Rationale behind a strong economy going forward
Having experienced a mild contraction in the second quarter of this year, the report said the economy is likely to gather pace – as evidenced by the recent high-frequency data for the third quarter of this year. This will result in a Gross Domestic Product (GDP) growth of 1.3%, making Ghana an outperformer in the Sub Saharan African region.
“We expect that Ghana’s Quarter 2 2020 (Q220) contraction will be an anomaly and that the economy will return to growth in the second half of the year. Moreover, the contraction was shallow, and compares favourably with the deeper contractions witnessed in South Africa (where real GDP fell by 17.1% y-o-y in Q220) and Nigeria (6.1%)”, it explained.
Ghana’s economy contracted by 3.2% in the second quarter of this year, a situation Fitch Solutions described as a minor contraction.
It further said “both the Ghana PMI and the Central Bank’s Consumer Confidence Index returned to positive territory in August. Greater price and exchange rate stability in 2021 will further hasten the recovery”.
Impact of 2020 elections on economy
The research arm of ratings agency Fitch said despite the outcome of the elections it do not expect much change with regard to policy direction
“Regardless of the outcome of the general election in December, we do not expect a significant shift in policy direction; both candidates are likely to main the policy to hike the price paid to cocoa farmers by 21.0%.”
Fitch Solutions had earlier projected 1.96% GDP growth rate for Ghana this year. It affirmed the 2.7% growth rate of Ivory Coast as the highest GDP in Sub Saharan African for this year.
Q2 GDP results
Ghana’s economy contracted by -3.2% in the second quarter of this year, the first time it has contracted since 1983.
According to figures released by the Ghana Statistical Service, the heavy fall was largely attributed to some restrictions on activities in the economy, which virtually came to a standstill during the partial lockdown period, as a result of the Coronavirus outbreak.
The information and communication sub-sector recorded the highest expansion of 74.2 per cent, while the hotel and restaurants sub-sector also recorded the highest contraction of 79.4 per cent.