Economic Complexity Index: Ghana ranks 103rd
Ghana’s economy, has been ranked as the 103rd most complex out of 133 countries as measured by the Economic Complexity Index (ECI).
The country’s current ranking, represents a drop by two places in the ECI ranking.
According to a new report published by the World Bank, the drop in ranking by Ghana is indicative of the country’s worsening complexity of its economy.
In the World Bank report titled, “Ghana Trade Competitiveness Diagnostic – Strengthening Ghana’s Trade Competitiveness in the Context of AfCFTA,” the World Bank notes that, the country’s worsening complexity is driven mainly by increased concentration in few primary commodities that is largely dominated by the extractive sector.
“Ghana’s exports are less complex than expected for its income level. This underpins the country’s inability to grow to its full potential in the medium term given the country’s factor endowment,” added the World Bank report.
Touching on the country’s merchandise trade over the last decade (2010-2019), the report notes merchandise as a share of total exports declined from 84 percent in 2010 to 62 percent in 2019 in line with the share of imports, which declined from 73 to 44 percent of total imports in 2019.
According to the report, over the past decade, Ghana’s trade in non-extractives has been on the decline as a share of GDP and has underperformed compared to the estimated potential of the country’s development status.
Ghana’s merchandise trade in non-extractive sectors has declined from 36 percent of GDP in 2010 to 21 percent in 2019. Non-extractive exports have stagnated as a share in GDP as well as in trade value since 2011.
The country’s merchandise trade, excluding the extractive sector, has been estimated at below the levels expected of countries with similar levels of economic development over the past decade.
While in nominal terms merchandise trade nearly doubled in value following the rapid expansion of the economy, its contribution to GDP declined from 48.5 percent in 2010 to 39.4 percent in 2019.
Exports of goods as a share of GDP remained largely unchanged at between 23.5 percent in 2010 and 23.8 percent in 2019, while imports declined from 25 to 16 percent of GDP in 2019.
Per the report, Ghana’s Export Potential Index shows that Ghana’s merchandise exports should have been 32 percent higher over the decade. The total gap between Ghana’s observed and predicted exports was, on average, estimated at $3 billion between 2010-2019.
Ghana’s comparators that have also exported below the estimated potential during 2010-2019 were Kenya and Nigeria. These missed exports are indicative of opportunities for export growth, provided frictions can be overcome.
Based on the Export Potential Index, Ghana’s exports to the US should have been 5.2 times higher, suggesting an additional $2 billion of potential exports.
Meanwhile, its exports to Germany should have been 2.6 times higher, with $450 million in missed exports, four times higher to Japan ($421 million), almost 6 times higher to Brazil ($345 million), and 8.7 times higher to Canada ($313 million).
Composition of Trade
The composition of Ghana’s merchandise export basket has become increasingly concentrated in the extractive sector, which now represents over 70 percent of total exports.
Since 2010, when oil and gas production started, Ghana’s total extractive exports have increased in trade value from a 50.4 percent in 2010 to 71.3 percent of merchandise exports in 2019.
Between 2010-2019, exports of gold almost doubled in trade value but no longer represent the lion’s share of merchandise exports, falling from 57.2 percent in 2010 to 35.4 percent in 2019.
This is because exports of fuels have shown remarkable growth, even though their share declined from 40 percent in the first year of exports in 2011 to 31.3 percent in 2019.
Extractive exports are distributed between gold and hydrocarbons, representing 55 percent and 45 percent of extractive exports respectively, in 2019.
Ghana’s extractive exports have been the driver of economic growth, exposing the Ghanaian economy to price shocks such as the one that occurred in 2020 due to collapsing oil prices during the global pandemic.
