"Ghana: Growth in construction industry to slow to 4.1% in 2022"

" \n Ghana: Growth in construction industry to slow to 4.1% in 2022 \n \n\n \n Growth in the construction industry on a year-on-year basis is expected to slow by 1.6% between last year (2021) and this year (2022). \n \n\n \n According to an assessment of the industry by research firm, Fitch Solutions, projected growth in the country\u2019s construction industry for this year is pegged at 4.1%, some 1.6% less the 5.7% growth rate recorded in the industry for 2021. \n \n\n \n The reduction in the projected growth rate, Fitch Solutions, attributes to the diversion of some part of government revenue from capital projects to debt servicing. \n \n\n \n Adding the industry is unlikely to benefit from higher oil and gold prices. \n \n\n \n \" We forecast Ghana\u2019s construction industry to grow by 4.1% y-o-y in 2022, a slowdown compared to the estimated growth of 5.7% y-o-y in 2021. Unlike in other markets, Ghana\u2019s infrastructure construction industry is unlikely to benefit from higher oil and gold prices, as we expect that increased public revenues will be channelled towards debt servicing and Ghana\u2019s high public wage bill rather than capital projects, as Ghana\u2019s access to international capital markets will be constrained in the near term,\" the research agency said. \n \n\n \n In view of the government diverting some of its revenues from going into capital projects (infrastructure), Fitch Solutions forecasts capital expenditure to shrink to 3.3% of GDP in 2022 down from 3.7% in 2021. \n \n\n \n In 2023, capital expenditure is further expected to shrink to 2.9% of GDP. \n \n\n \n \"While this puts capital expenditure levels above those in 2018-2020, when Ghana\u2019s construction industry growth averaged -0.1% per year, it remains below the comparatively high annual average levels of 4% of GDP between 2010 and 2017, which enabled the construction industry growth rates averaging 8.1% per year,\" it added. \n \n\n \n Read further details of Fitch Solutions' assessment on the construction industry and more: \n \n\n \n Lower Public Investment To Slow Down Ghana Construction Industry Growth \n \n\n \n Key View \n \n\n \n We forecast Ghana\u2019s construction industry to grow by 4.1% y-o-y in 2022, a slowdown compared to the estimated growth of 5.7% y-o-y in 2021. Ghana\u2019s infrastructure construction industry is unlikely to benefit from higher oil and gold prices, as we expect that increased public revenues will be channelled towards debt servicing and Ghana\u2019s high public wage bill rather than capital projects. We expect that a substantial depreciation of the Cedi against the US dollar in 2022 will in the near term make private sector investors more reluctant to invest in Ghana\u2019s infrastructure and construction sector and offset the adverse impact of subdued public infrastructure spending on the market\u2019s construction industry growth. \n \n\n \n We forecast Ghana\u2019s construction industry to grow by 4.1% y-o-y in 2022, a slowdown compared to the estimated growth of 5.7% y-o-y in 2021. Unlike in other markets, Ghana\u2019s infrastructure construction industry is unlikely to benefit from higher oil and gold prices, as we expect that increased public revenues will be channelled towards debt servicing and Ghana\u2019s high public wage bill rather than capital projects, as Ghana\u2019s access to international capital markets will be constrained in the near term. Accordingly, we forecast government capital expenditure to shrink to 3.3% y-o-y of GDP in 2022 and 2.9% y-o-y of GDP in 2023, down from 3.7% y-o-y in 2021. While this puts capital expenditure levels above those in 2018-2020, when Ghana\u2019s construction industry growth averaged -0.1% per year, it remains below the comparatively high annual average levels of 4% of GDP between 2010 and 2017, which enabled the construction industry growth rates averaging 8.1% per year. In 2023, we forecast Ghana\u2019s construction industry growth to accelerate slightly as we forecast the depreciation of the Cedi against the USD to slow down to 4.6% y-o-y. Generally, this will reduce revenue risks for foreign investors, while lower inflation will improve demand for residential and non-residential construction. However, Ghana\u2019s access to international capital markets will remain constrained and will continue to weigh on public infrastructure spending as well as the market\u2019s construction industry growth. \n \n\n \n Muted Public Spending Limits Construction Growth \n \n\n \n Ghana - Government Capital Expenditure, % of GDP; Construction Industry Value, real growth, % y-o-y \n \n\n \n \n \n\n \n e\/f = Fitch Solutions estimate\/forecast. Source: UN, Fitch Solutions \n \n\n \n Despite the market\u2019s strong fundamentals, including a track record of private investment in energy infrastructure, comparatively high political stability and security, and a relatively diverse competitive landscape, we expect that a substantial depreciation of the Cedi against the USD in 2022 will in the near term make private investors more reluctant to invest in Ghana\u2019s infrastructure sector. We thus do not expect that private investment will meaningfully cushion the negative impact of subdued public infrastructure spending on the market\u2019s construction industry growth. We forecast that in 2022, the Ghanaian Cedi will depreciate by 22.7% against the USD, significantly increasing revenue risks for the foreign investors that rely on expatriation of revenues. \n \n\n \n Economic Openness Boosts Operating Environment In Ghana \n \n\n \n Ghana & Regional Average - Trade & Investment Risk \n \n\n \n \n \n\n \n Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Trade and Investment Risk Index \n \n\n \n At the same time, Ghana ranks in first place out of the 16 West African markets included in our proprietary Fitch Solutions Operational Risk Index. With a Trade and Investment Risk score of 50.9 out of 100, Ghana outperforms the West Africa average of 36.4 and ranks in a competitive 2nd position regionally, and in 88th place out of 201 markets globally. Similarly, with a Crime and Security Risk score of 51 out of 100 Ghana outperforms the West Africa average of 33.3 and ranks in 1st place regionally and in 90th place out of 201 markets globally. \n "

"Ghana: Growth in construction industry to slow to 4.1% in 2022"

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