Fragile economic landscape heightens investor focus on Ghana’s mid-year budget review
As Ghana’s IMF programme and associated economic and structural reforms commence, lingering vulnerabilities continue to erode confidence among investors and players in the real sector.
Against this backdrop, market attention is shifting towards the eagerly anticipated mid-year budget review scheduled for July 2023, as the first half of the year draws to a close.
Despite marginal improvements in the performance of the Ghanaian cedi, interest rates, and external buffers, these gains remain fragile in the face of a severely challenged near-term growth outlook. While the upbeat growth outturn of 4.2% in Q1-2023 provided a glimmer of hope, the frontloaded austerity measures envisioned under the IMF programme have resulted in a tightening business environment.
The sweeping reforms in the utility tariff regime and energy sector, coupled with induced wage increases, have led to higher operating costs for businesses. Furthermore, the elevated interest rates have dampened credit growth and hindered capital expansion.
Consequently, investors eagerly await updates on strategies aimed at stimulating growth and bolstering market confidence, as these will significantly shape business decisions in the second half of 2023. As a result, we anticipate that nominal interest rates will remain elevated, and the secondary bonds market will remain largely stagnant in the run-up to the mid-year review.
The mid-year budget review will serve as a critical juncture for the Ghanaian economy, providing an opportunity for the government to address ongoing vulnerabilities and instill confidence in both domestic and international investors.
Measures aimed at stimulating growth, reducing business operating costs, and facilitating credit access will be closely scrutinized. Market participants will closely monitor the government’s plans to enhance market confidence, foster a conducive business environment, and drive economic recovery in the face of persistent challenges.
As Ghana navigates this delicate economic landscape, the outcome of the mid-year budget review will serve as a barometer for investor sentiment and market expectations. The need for comprehensive reforms and targeted strategies to address vulnerabilities, foster sustainable growth, and restore investor confidence remains paramount.
The outcomes of the review will not only shape the trajectory of Ghana’s economy for the remainder of 2023 but will also determine the extent of investor engagement and market activity in the coming months.
