Ghana: World Bank lowers 2023 GDP growth rate to 2%
Ghana’s economy is facing headwinds as the World Bank lowers its growth rate for the country in 2023 to 2.0%, placing it at the 29th position in Sub-Saharan Africa. This is a significant downgrade from the 2.7% growth rate projected earlier for the country. The Bretton Wood institution attributes the expected low growth rate to global shocks and heightened macroeconomic instability.
According to the World Bank’s April 2023 Africa Pulse Report, Ghana’s economy has been struggling with high levels of public debt and elevated inflation, fueled by a sharp weakening of the cedi. This has led to a decline in government consumption due to high debt service and restricted access to international capital markets. Business and consumer confidence slumped in late 2022, but the Purchasing Managers Index is gradually picking up, signaling an expansion in economic activity with a score of 50.2 in February 2023.
Moreover, the Bank of Ghana raised its policy rate by a record 1,500 basis points to 29.5% in March 2023, up from 14.5% in December 2021, to curb rising inflation. The report notes that the Ghanaian economy is expected to have slowed in 2022 to 3.2%, down from 5.4% in 2021 and far below the country’s average pre-pandemic performance of 6.1%.
The recovery of economic activity in Sub-Saharan Africa is multispeed, with wide variation across countries, according to the report. The region’s moderate growth in 2022 was associated with large countries on the continent registering growth rates that were lower than their long-term average. More than half of the countries in the region are growing at rates below their long-term average. Among the 10 largest economies in Sub-Saharan Africa, eight are growing at rates that are below their long-term average growth.
Sudan, Nigeria, Angola, and Ethiopia are among the countries with weaker performance compared to their long-term growth rates. However, Congo DR is expected to become the fastest-growing country in Sub-Saharan Africa in 2023.
Despite the challenging economic conditions, Ghana’s Finance Minister, Ken Ofori-Atta, during the presentation of the 2023 Budget in November, stated that the economy will expand by 2.8% in 2023. He further added that the services sector would “remain the dominant sector over the medium term in percentage contribution to overall national output, followed by industry and agriculture.” He also noted that the economy is expected to rebound from 2024 and grow steadily in the medium term to record an average growth of 4.8 percent over the period between 2024 and 2026.
Ghana’s economy faces challenges as it struggles with high levels of public debt, elevated inflation, and a sharp weakening of the cedi. Despite the World Bank’s downgrade of its growth rate for 2023, Ghana’s Finance Minister remains optimistic about the country’s economic prospects and expects a rebound from 2024 with steady growth in the medium term.
