Ghana Proved Robust To External Economic Situation Of 2009

Ghana proved robust amid the external headwinds of 2009, boding well for economic expansion going forward. Real GDP growth is estimated to have been 4.7% in 2009 and we see it accelerating into double digits by 2011. The onset of domestic oil production will play a major part in this story. Not only will it boost growth, it should also lead to remarkable reductions in the deficits on the current account and fiscal account. In fact, we expect both accounts to flip into surplus over the coming years.

There is, however, considerable uncertainty surrounding both the start date and the output level of oil production. This being the case, we outline three scenarios for growth in this quarterly Business Forecast Report. Ghana’s political risk profile is often over-simplified, with many heaping praise on the nation for its stability and peace. True, Ghana does have strong democratic credentials but we would stress that this is partly in a relative sense, comparing the country with its regional neighbours. This quarter, we consider the long-term political outlook, focusing on several key challenges and threats to stability. In our view, the major challenge that the Ghanaian authorities face over the coming years is the responsible management of oil revenues. We present several political scenarios detailing how events may unfold. O n the economic front, the outlook for oil production has changed since our last quarterly report, with output now expected to begin in early 2011, rather than late 2010. We have made adjustments accordingly to a host of our macroeconomic forecasts. Most significantly, our core scenario now sees only mild currency appreciation in 2010. We have also reduced our 2010 real GDP growth forecast to 6.4% from 6.7% previously.

MrPressRelease App for iPhone
In addition to the above-mentioned scenario-based analysis of growth, we include in this report our outlook for the fiscal accounts, detailing why we believe fiscal consolidation is under threat. Furthermore, we provide an overview of the local debt market. Ghana attracts business due to its favourable political climate and the pro-business reforms of recent years which include free trade zones and laws encouraging foreign investment. However, there are notable weaknesses in the business environment with infrastructure proving an Achilles’ heel; power and water shortages still occur, although the situation is improving. In this report, we detail several important proposals contained in the 2010 budget relating to the business environment, including a potential increase in the minimum royalty paid by mining companies.