Despite Global Financial Crisis,Investments Increase

Figures released by the Ghana Investment Promotion Council (GIPC), have given hope that, indeed, the Ghanaian economy is on course to beat the full effects of the global financial crisis

Despite widespread assessment that the Ghanaian economy has really choked under the strain of the financial market turmoil, total new investments soared by 45 per cent at the end of the first quarter of this year.

Total new investments for the first three months of this year amounted to GH¢521.25 million (US$372.32 million) compared to last year’s GH¢351.79 million (US$256.68 million). This investment inflow has given the strongest indication yet that the international investor community has strong confidence in the Ghanaian economy.

A look at the figures indicates that GH¢508.68 million (US$363.34) was re-investments in terms of capital goods imported and GH¢12.57 million (US$8.98) equity transfers for new projects registered for the period under review.

Last year, for the same period, a total of GH¢334.13 million (US$236.66 million) worth of re-investments in terms of capital goods imported and GH¢17.66 million (US$18.02 million) equity transfer for new projects were registered.

Analysts are of the view that the country’s continued attraction of foreign direct investment is encouraging and shows that in the next “few years Ghana could be the bread basket of Africa”.

The current FDI inflows follows two years of unprecedented investment in the country and that “Ghana must now look towards harnessing domestic resources for a stronger local investor base while continuing to offer attractive opportunities to foreign investors”, a statement from GIPC stressed.

This investment drive into the country is expected to generate 3,668 jobs with about 95.23 per cent or 3,493 of jobs created going to Ghanaians and the remaining 4.77 per cent or 175 jobs going to expatriates.

Although for the period under review FDIs generally increased globally, Ghana’s case comes up for special mention in terms of its attractive investment climate and strong democratic and general governance structures.

Projects registered for the period
However, over the period under review, the number of projects registered was lower than corresponding figures for last year, with 35 new projects being registered for the first quarter of this year as compared to 92 new projects for last year.

Again, in terms of the value of new projects recorded, the first quarter of this year saw an estimated GH¢25.27 million (US$18.05 million) as compared to GH¢2.97 billion (US$3. billion) for the same period last year.

While experts say the high re-investments in capital goods were indicative of the confidence investors have in the economy, others point to the low level of investments in new projects as a sign of low confidence in the economy.

Mixed assessment of the situation
According to the Monetary Policy Committee (MPC) quarterly report of the Bank of Ghana, “the latest April survey shows further drops in both business and consumer confidence from the February surveys, however, business and consumer expectations about the prospects of the economy continue to remain generally positive.”

The Central Bank’s Composite Index of Economic Activity (CIEA) in the first quarter of 2009 showed that the level of economic activity picked up marginally over the level recorded in December 2008.

In year- on- year terms, according to the MPC report, the index grew by 17.0 per cent, below the trend growth rate of 22.6 per cent, and compared with 30.2 and 20.8 per cent recorded for the same period in 2008 and 2007 respectively.

“In real terms, the index grew by 2.2 per cent compared with 19.6 and 9.7 respectively for 2008 and 2007. This is against the backdrop of 2008 GDP growth rate of 7.3 per cent, based on revised estimates by the Ghana Statistical Services,” the MPC report stated.

According to the GIPC, the FDI component of the total investments to the country for the first quarter amounted to GH¢23.14 million (US$15.53 million), representing 91.57 per cent of total estimated value. Local currency component of investments amounted to GH¢2.13 million (US$2.99 billion), an increase of 8.43 per cent.

“For the correspondent quarter of 2008, FDI component of the estimated cost of the projects registered was GH¢2.93 billion (US$2.99 billion)”, officials of GIPC indicated.

Interestingly, the total foreign equity transfers was GH¢18.82 million (US$13.44 million for this quarter; however, for the same period last year it amounted to GH¢632.22 million (US$451.58 million).

The Ghanaian economy is not immune to the effects of the global crisis, even though the impact has been relatively limited in the first round, according to the MPC report.

The economy, MPC said, appears to be still experiencing high growth and the lingering effects of the large fiscal expansion in 2008 and the volatile energy and food price developments in that year.

Increased exports hold the key
Analysts are of the view that given the current favourable external environment which has seen the firming up in the prices of Ghana’s major export commodities on the international market during the first quarter of 2009, the country was likely to counter the effects of the external shocks.

This will only hold if the country’s main exports experience high prices on the international market. So far, the commodities market has experienced serious upturn in recent years.

The average realised price of cocoa beans exports increased by 17.8 per cent in the first quarter of 2009 to US$2,794.92 per tonne. Similarly, the average export price of gold increased by 12.4 per cent to US$912.37 per ounce in the first quarter of 2009.

Again, the average realised weekly price per barrel of the benchmark Brent crude oil increased by 15.8 per cent from US$42.97 at the end of 2008 to US$49.76 at the end of March 2009.

Exports of cocoa beans and products amounted to US$553.3 million in the first quarter of 2009, compared with US$403.2 million for the same period in 2008 (an annual growth of 37.2 per cent).

Exports of cocoa beans and products in the first quarter 2008 registered an annual growth of 5.5 per cent over a year earlier. Cumulative cocoa purchases for the 2008/2009 main crop season as at May 1, 2009 amounted to 595,015 tonnes (against a forecast of 600,000 tonnes for the entire crop season), compared with 598,419 tonnes for the same period in the 2007/2008 season.

Gold exports for the first quarter of 2009 was US$581.95 million compared with US$608.92 million over the corresponding period of 2008. In year- on- year terms, there was a 4.4 per cent decline in the value of gold exports, reflecting 4.0 per cent decline in the average price and 0.4 per cent decline in volume.

Non-traditional exports for the first quarter of 2009 amounted to US$241.28 million, compared with US$150.75 million for the same period in 2008, representing a growth of 60.1 per cent.

Given this performance in the first quarter, economic experts are of the view the country’s economy stands to benefit more when global market conditions improve from this second quarter and beyond. GB