Private investment, consumer spending to bounce back in 2022
Private investment and consumer spending is expected to bounce back strongly this year driving economic growth by about 4.8%.
This is a disclosure from Fitch Solution’s Sub Saharan African update for the year.
The agency is confident that majority of Ghana’s population will be vaccinated against the Covid-19 in 2022, a move that will lead to the further easing of restrictions.
Gianmarco Capati who is the country risk analysis in charge of Sub Saharan Africa at Fitch Solutions made the revelation.
He said, “We expects that consumer spending will continue to gradually recover over the coming quarter and vaccinations have accelerated sharply since November as more supply arrived and we think that for the progress on the Strong’s will reduce the likelihood of restrictions being tightened as during the country’s third wave in Q3 2021.
“As the consumer outlook improves, we are expect business activity and sentimental strength this year. Ghana’s EMI rebounded strongly in September after restrictions were eased and has remained above 50 including December when Omicron was spreading. This points to improving conditions at a particular basis where fairly optimistic about 2022 prospects up”, he added.
Meanwhile, According to Fitch Solutions, government is likely to continue to record wide budget deficits and arrears, particularly in the short term, despite planned reforms to broaden the tax base.
In its Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis of the Ghanaian economy for the first quarter this year, the research firm however, stated the country has better business operating conditions and greater stability than peer economies such as Nigeria and Cameroon.
The report by Fitch Solutions notes that the high public debt levels will continue to weigh on Ghana’s fiscal outlook over the coming years due to the under-performance of government revenue and that could reduce the availability of funds for government to undertake critical infrastructure projects.
“The government is likely to continue to record wide budget deficits, particularly in the short term, despite planned reforms to broaden the tax base, while rising external debt payments will continue to weigh on Ghana’s external accounts and ensure the current account remains in deficit in the coming years.”
On the country’s weaknesses, Fitch Solutions said the large – though declining – informal sector eludes the governments’ coffers, despite recent efforts to broaden the tax net.
It warned that Ghana’s reliance on commodity exports such as cocoa and gold exposes the country to fluctuations in global commodity prices.
Regarding threats, Fitch Solutions pointed out that further delays to the country’s Covid-19 vaccine roll-out would expose Ghana to further waves of infections, and potentially derail the economic recovery.
“In the short term, however, the coronavirus pandemic will remain a risk to the economic outlook. Further waves of infections, new virus variants and a slower-than-expected vaccine roll-out could all derail the recovery.”
Also, it cautioned that climate change will pose medium to long-term risks to the crucial cocoa industry.
On strengths, Fitch Solutions, said the country has a better business operating conditions and greater stability than peer economies such as Nigeria and Cameroon, and therefore businesses will benefit from the relatively pragmatic government policy programme implemented in recent years
Despite the challenges with the fiscal economy, the ratings agency, Fitch, is projecting a 5.5% expansion of the Ghanaian economy this year.
It is attributing that to a recovery in the industrial sector, including oil, in line with global growth recovery.
The country experienced three years of strong growth prior to 2020, largely driven by increasing oil production.
“We expect oil production to increase to 190 thousand barrels per day (kbpd) in 2022, from an estimated 160 kbpd in 2021, but to remain flat through 2023, which will limit Ghana’s medium-term growth potential,” Fitch said.
Furthermore, it expects post-pandemic growth recovery to keep growth potential around 5%.
However, it expressed worry about the number of increasing Covid-19 cases, due to the Omicron wave, but noted that Omicron is not likely to significantly impact the 2022 growth rate.
“The number of Covid-19 cases has increased dramatically in January 2022, due to the Omicron wave, but hospitalizations and deaths remain below previous waves”.
Going forward, Fitch said the low level of vaccination means that Covid-19 will continue to present risks to Ghana’s medium-term growth.