Country Report Ghana May 2019

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Country Report

Ghana

Generated on May 13th 2019

Economist Intelligence Unit 20 Cabot Square London E14 4QW United Kingdom

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Symbols for tables "0 or 0.0" means nil or negligible;"n/a" means not available; "-" means not applicable Ghana 1

Ghana

Summary 2 Briefing sheet

Outlook for 2019-23 4 Political stability 4 Election watch 5 International relations 5 Policy trends 6 Fiscal policy 6 Monetary policy 7 International assumptions 8 Economic growth 8 Inflation 9 Exchange rates 9 External sector 10 Forecast summary

Data and charts 11 Annual data and forecast 12 Quarterly data 13 Monthly data 14 Annual trends charts 15 Monthly trends charts 16 Comparative economic indicators

Summary 16 Basic data 18 Political structure

Recent analysis Politics 21 Forecast updates Economy 22 Forecast updates

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 2

Briefing sheet Editor: Nathan Hayes Forecast Closing Date: May 2, 2019 Political and economic outlook Ghana’s overall political stability is not in question, but the contested political landscape will continue to aggravate tensions between the ruling New Patriotic Party (NPP) and the opposition National Democratic Congress. The NPP’s ambitious industrialisation programme will enjoy some success, with ongoing investment expected to continue, but progress will be hampered by structural weaknesses and regional imbalances within Ghana. Rising oil and gas production will support real GDP growth in the 2019-23 forecast period. The government’s industrialisation push and moves to strengthen the banking sector will benefit non-oil economic growth, although credit is still relatively scarce. Inflation will remain high in 2019, at a forecast average of 9.6%, given a weakening currency and strong growth in private consumption. The rate will remain close to the upper bound of the official 6-10% target range in 2020-23, for similar reasons. The cedi will remain prone to periods of volatility, given the ongoing domestic economic weakness of a high dependence on commodity prices. From an average of GH¢4.58:US$1 in 2018, the currency will weaken to GH¢6.50:US$1 in 2023. The Economist Intelligence Unit forecasts that the current account will shift from an estimated deficit of 1.8% of GDP in 2018 to a surplus of 1.1% of GDP by 2023, owing to rising oil exports over the forecast period. Key indicators 2018a 2019b 2020b 2021b 2022b 2023b Real GDP growth (%) 6.3 6.5 5.7 5.4 6.1 6.4 Consumer price inflation (av; %) 9.8 9.6 9.5 8.5 9.1 9.3 Government balance (% of GDP) -3.4 -4.6 -5.2 -4.6 -3.8 -3.1 Current-account balance (% of GDP) -1.8c -1.8 -2.0 -1.5 0.3 1.1 Money market rate (av; %) 17.0 16.5 16.0 15.5 16.5 17.5 Exchange rate GH¢:US$ (av) 4.58 5.31 5.86 6.18 6.35 6.50 a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimates.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 3

Key changes since April 2nd We now expect the cedi to average GH¢5.31:US$1 in 2019, from GH¢5.20:US$1 previously, with depreciation driven by the government’s fiscal position, together with the large current account deficit and increased political uncertainty before the 2020 elections. We have revised down our inflation forecast for 2019, to 9.6% from 10.9% previously, as the broader downward trend in inflation from its 2016 highs continues and as the higher base effects from 2018 temper the growth rate more than we previously envisaged. The month ahead May 22nd—Bank of Ghana monetary policy committee meeting: We expect the central bank to keep the policy rate at 16%. Inflation will remain elevated in 2019, moderating slightly to 9.6%, suggesting that rates will not be cut further this year. Major risks to our forecast Scenarios, Q1 2019 Probability Impact Intensity Ghana suffers a major terrorist attack Moderate High 12 Land transactions fall through, at a substantial financial cost Moderate High 12 Closer ties with neighbouring Côte d'Ivoire yield major benefits Moderate Moderate 9 Companies end up with a higher tax burden despite notional cuts to tax Moderate Moderate 9 rates Corruption and cronyism get worse Moderate Moderate 9 Note. Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential developments that might substantially change the business operating environment over the coming two years. Risk intensity is a product of probability and impact, on a 25-point scale. Source: The Economist Intelligence Unit.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 4 Outlook for 2019-23 Political stability Ghana’s underlying political stability is expected to endure over the forecast period, despite an acrimonious partypolitical landscape. The two dominant parties—the ruling New Patriotic Party (NPP) and the National Democratic Congress (NDC)—have alternated in power since the return of multiparty politics in 1992, and their rivalry will remain the key feature of the political scene. Instances of intimidation and violence between their supporters have been reported at recent general elections. These are likely to continue, although such incidents are very limited outside election campaigns, and are not expected to lead to broader unrest. Corruption in the public sector remains endemic and a source of anger among the population. In February 2018 a special prosecutor, Martin Amidu, was sworn in, with the remit of reducing graft. Progress has not yet been reported, but pressure to reduce corruption will rise ahead of the 2020 elections. Failure to address this issue could weigh on voter confidence in the political system, although such grievances are relatively low-level. Public appointments are often made on the basis of party affiliation. This is one explanation for an oversized government team (comprising 110 ministers). However, there are fewer opportunities at the lower levels of politics, which may cause resentment among the party ranks and could depress voter turnout as members at grass-roots level play a key role in local campaigning.

Election watch The next national elections are due in November 2020. Nana Akufo-Addo, the president, and his NPP will see the economic situation generally improve during the remainder of their terms of office. In the presidential election, Mr AkufoAddo will face a challenge from John Mahama— Ghana’s president from 2012 to early 2017—who was elected leader of the opposition NDC in February 2019. The 2016 legislative election was won by the NPP; the campaign was dominated by the faltering economy, which many Ghanaians still associate with Mr Mahama. Accordingly, The Economist Intelligence Unit believes that it will be difficult for the NDC under Mr Mahama to portray itself as the better custodian of Ghana’s economy, especially as the country’s growth outlook is fairly strong. We therefore expect Mr Akufo-Addo and the NPP to secure re-election in 2020. However, if the NDC can present a coherent opposition and hold the NPP to account on unfulfilled campaign promises—particularly on job creation and industrialisation, where progress has been generally slow and success patchy—the election could be closely contested.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 5 International relations The government will continue to prioritise enhancing trade and investment ties with the international community, moving away from historical relations that have tended to focus more on aid. Ghana’s industrialisation drive is spurred by China, a key trading partner and source of investment, notably in infrastructure. Beyond China, trade links with the US will be entrenched by the African Growth and Opportunity Act (AGOA). The government aims to achieve exports of US$500m to the US by 2020. Ghana is part of the Economic Community of West African States (ECOWAS), which will expand regional trade links. Similarly, Ghana ratified the African Continental Free-Trade Area (AfCTA) agreement in 2018, which will come into force in May 2019. However, the impact of AfCFTA will be limited as regional protectionist sentiment and logistical bottlenecks will constrain growth potential. In addition, Ghana and Côte d’Ivoire seek to boost cooperation in the cocoa sector. However, rivalries between the two countries, combined with ongoing protectionist measures, are likely to dampen potential benefits. Relations with Togo remain fraught. The Togolese navy prevented two Ghanaian seismic survey vessels from carrying out oil exploration work in the East Keta ultra-deep block between December 2017 and May 2018, despite ongoing negotiations over territorial waters. We expect Togo and Ghana to continue to seek to find a resolution through bilateral talks, and do not expect a significant further escalation in tensions.

Policy trends In April the IMF finalised Ghana’s extended credit facility (ECF). The Fund praised the country’s progress on fiscal consolidation, but cautioned that such adjustments must continue to drive policy. In December 2018 the government passed a fiscal responsibility law aiming to limit future budget deficits to a maximum of 5% of GDP, although we expect the deficit to slip beyond this in 2020, an election year. Indeed, government efforts towards fiscal consolidation remain constrained by high public spending, as well as relatively low tax revenue mobilisation, owing to high levels of tax avoidance. Fiscal laxity may necessitate reliance on the Fund in future, although this is not our core forecast as we expect the fiscal deficit generally to narrow over the outlook period. The NPP administration will continue to prioritise industrialisation, in line with its election pledge to establish at least one factory in each of Ghana’s 254 districts by 2020. External credit (chiefly from the US and China) has been extended under the initiative to support small and medium-sized enterprises, but progress has been hampered in some regions by a lack of supporting infrastructure—notably electricity—a poorly trained workforce, and weaknesses in the business environment, combined with stark regional imbalances. The authorities are also keen to develop domestic refinery capacity to develop the downstream oil sector to improve value-added and revenue generation. However, fiscal, infrastructure and local financial-sector constraints will delay progress. On a positive note, the administration continues to focus on the need to improve the business environment in order to boost private-sector investment, although new laws usually take a long time to be implemented.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 6 Fiscal policy We expect the government to pursue an expansionary fiscal policy in the run-up to the 2020 election as it seeks to boost economic growth (and as spending is not restricted by the need to adhere to an IMF programme), before financing constraints necessitate a shift to a contractionary policy. The government has sought to strengthen the Ghana Revenue Authority, ensure broader enforcement of tax identification number measures, and build the capacity of local governments to collect taxes. However, enforcement remains an issue and many companies continue to benefit from various loopholes. Accordingly, we do not expect these collection measures to provide a major boost to government revenue. Oil prices will decline in 2019, although production volumes will increase slightly. In net terms, the production gains will outweigh the negative price effect and government revenue will rise in 2019. With oil prices forecast to decline further in 2020—together with lower growth in production volumes and weaker enforcement of taxation legislation in an election year—we expect revenue to slip. From 2021-23, however, we expect to see a recovery in oil prices, combined with increased output volumes and modest growth in the non-oil economy, causing government revenue to rise in 2023. In March the government issued a US$3bn Eurobond, designed to finance spending in 2019 and pay off previous debts. Following the conclusion of the IMF programme in March, we expect to see some laxity after a period of fiscal consolidation. Moreover, the authorities will remain reluctant to lower spending on salaries and subsidy programmes, given the risk of public resentment ahead of the 2020 elections. The publicsector wage bill—together with high interest payments and capital expenditure to help to deliver ambitious industrialisation promises—will drive expenditure increases. We forecast that expenditure will increase in 2020, owing to higher election-year spending. Over the remainder of the forecast period, we expect to see some fiscal consolidation, particularly in the wage bill, with expenditure declining slightly by 2023 as the government seeks to limit the fiscal deficit. Overall we expect a widening of the fiscal deficit in 2019, to 4.6% of GDP, from 3.4% of GDP in 2018. We expect further fiscal slippage in the election year of 2020, with the deficit increasing to 5.2% of GDP as a result. We then forecast a return to consolidation, leading to a lower deficit in 2023, of 3.1% of GDP. The rate of decline in the fiscal deficit at a time of robust economic growth will be enough to make a modest dent in the public debt stock, which will edge down from an estimated 53.5% of GDP at the end of 2018 to about 52% of GDP at the end of 2023. However, longer-term debt sustainability will still require ongoing fiscal responsibility and continued robust levels of economic growth. Ongoing currency weakness exacerbates the risk of holding dollar- denominated debt, as it becomes more expensive in cedi terms to service.

Monetary policy In January the monetary policy committee of the Bank of Ghana (the central bank) reduced the policy rate by 100 basis points, from 17% to 16%. Inflation will remain elevated in 2019, moderating slightly to 9.6%, from 9.8% in 2018, suggesting that rates will not be cut further over the year. As inflation moderates further in 2020-21 and domestic demand growth weakens, there will be an opportunity for a resumption of monetary easing. This will be followed by renewed tightening in 2022-23, as domestic demand once again strengthens and inflation picks up. Monetary policy has tended to be volatile as the BoG seeks to balance inflationary pressure while also encouraging lending.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 7 International assumptions 2018 2019 2020 2021 2022 2023 Economic growth (%) US GDP 2.9 2.2 1.7 1.7 2.0 1.8 OECD GDP 2.2 1.7 1.6 1.8 2.0 1.9 World GDP 2.9 2.7 2.6 2.8 2.9 2.8 World trade 4.4 3.3 2.8 3.8 3.9 4.0 Inflation indicators (% unless otherwise indicated) US CPI 2.4 2.2 1.4 2.2 2.1 1.8 OECD CPI 2.5 2.3 1.9 2.1 2.2 2.1 Manufactures (measured in US$) 4.9 2.4 3.3 3.4 3.2 3.0 Oil (Brent; US$/b) 71.1 66.5 60.5 69.8 75.6 75.0 Non-oil commodities (measured in US$) 1.9 -3.2 3.2 4.1 1.4 0.8 Financial variables US$ 3-month commercial paper rate (av; %) 2.0 2.5 2.2 2.1 2.5 2.9 US$:€ (av) 1.18 1.14 1.19 1.21 1.24 1.24 ¥:US$ 110.4 110.2 108.9 104.9 100.5 96.1

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 8 Economic growth Economic growth over the forecast period will be driven predominantly by the hydrocarbons sector, with a continued ramping up of oil and gas production expected. However, this oil-driven growth will mask constraints—such as low productivity, infrastructure bottlenecks and relatively weak access to credit—elsewhere in the economy. We expect there to be some spillover effects from hydrocarbons—with increases in broader industrial production, infrastructure investment and auxiliary services—but this will be fairly limited. In January Tullow Oil increased the production outlook for Ghana’s Jubilee and Tweneboa Enyenra-Ntomme oilfields for 2019, despite the weak price outlook for the year. The company is looking to generate revenue to service debts built up from costly regional exploration and development work. Outside the oil sector, we expect lending growth to continue to recover from a slump in early 2018, which was caused by a rise in the reserve requirement. A stronger banking sector following consolidations will also be in a position to take advantage of improved liquidity conditions following the January 2019 cut in the policy rate, which will support growth in industrial activity. Consumer demand will remain robust during the year, helped by the lower cost of credit, but ultimately constrained by low value added in the agricultural sector—which serves to limit wage growth for workers—and price rises moderating consumer sentiment. Accordingly, we forecast overall GDP growth of 6.5% in 2019. We expect growth to ease to 5.7% in 2020 as Ghana is affected by weaker global economic conditions—weighing on investment flows into the country—although government and private consumption levels will rise slightly ahead of the election that year. In February Aker Energy announced the discovery of 450m-550m barrels in the Deepwater Tano Cape Three Points block off the coast of Ghana, with potential recoverable reserves of nearly 1bn barrels. The first oil from the Aker fields is expected by the first quarter of 2021. Growth is expected to average 5.9% in 2021- 23, reflecting the development of these new oil and gas resources boosting output volumes, combined with our expectations for a recovery in global oil prices. In addition, we expect to see stronger nonoil performance as the government’s policy reform efforts to boost the private sector —such as One District, One Factory—start to bear fruit. However, agricultural growth will continue to be hampered by unfavourable prospects for the cocoa sector, reflecting the poor underlying quality of the tree stock; some 40% of Ghana’s cocoa farms are infected with diseases (particularly swollen shoot virus) or have overaged stock, and this will temper growth in yields. Hot, dry weather at the start of the season will also weigh on cocoa output in 2019. Economic growth % 2018a 2019b 2020b 2021b 2022b 2023b GDP 6.3 6.5 5.7 5.4 6.1 6.4 Private consumption -0.3 9.8 5.0 4.4 5.5 5.8 Government consumption 73.7 11.8 6.3 2.9 3.2 3.1 Gross fixed investment -5.0 7.2 5.2 6.0 6.5 6.3 Exports of goods & services 10.3 15.0 5.4 6.5 7.5 8.2 Imports of goods & services 4.6 5.1 4.3 4.7 6.4 6.7 Domestic demand 2.4 9.7 5.4 4.8 5.7 5.9 Agriculture 4.8c 3.4 4.0 3.3 3.5 3.6 Industry 10.6c 8.7 6.0 6.0 7.1 7.7 Services 2.7c 5.5 6.0 5.9 6.2 6.4 a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimates.

Inflation We expect that annual average inflation will remain elevated in 2019, although it will moderate slightly to 9.6%, from 9.8% in 2018. The weaker cedi—combined with growth in private consumption levels—is driving increases in consumer prices, notably through the rising cost of imported food items (which constitute a large share of the total food bill). We expect the BoG to manage to keep inflation within the official target band of 6-10% during 2020-23. However, with fiscal consolidation taking place at a relatively slow pace and domestic demand remaining robust, inflation will remain close to the upper bound of the target range, averaging 9.1% in 2020-23.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 9 Exchange rates The cedi weakened sharply over the first quarter of 2019, driven predominantly by large current- account and fiscal deficits, low confidence in the financial sector, and increased political uncertainty before the 2020 elections. These dynamics will maintain downward pressure on the currency, with the cedi depreciating to GH¢5.31:US$1 on average in 2019. These dynamics will continue in 2020, with increased spending ahead of the election; we forecast that the cedi will depreciate to GH¢5.86:US$1 on average over the year. Domestic and global sentiment will improve in 2021-23, but we expect the cedi to depreciate further as the strong dollar and Ghana’s relatively weak domestic economic picture continue to weigh on the currency, although higher export revenue from increased oil earnings will provide some relief. We forecast that the cedi will weaken to an average of GH¢6.50:US$1 in 2023.

External sector Increasing oil output, combined with rising production and prices of gold, will help to boost export earnings in 2019, although some moderation will come from declining prices and reduced output for cocoa. We expect steady growth in export revenue over the remainder of the forecast period. Oil production from new fields will increase strongly—both in the near term and in the latter part of the forecast period—and government efforts to formalise smallscale mining and to provide large mines with better protection from illegal incursion will support gold production. Rising import expenditure will be driven by steady growth in the domestic economy and strong demand for capital goods imports to support ongoing infrastructure development. The large services deficit will be driven by trade-related services as imports continue to grow, as well as by expenditure on technical services for oil and gas projects. The primary income deficit will also remain large, owing to profit repatriation and interest payments on external debt. The secondary income account will continue to post surpluses, reflecting robust worker remittances. However, we expect dips in the services and primary income deficits and the trade and secondary income surpluses in 2020 as the effects of the US-led global slowdown over the year hit local demand, profits and remittance inflows from expatriate Ghanaians. We forecast that the current account will remain in deficit through to 2021, before registering a small surplus in 2022-23 on the back of rising oil exports. The deficit will be notably lower than the current-account shortfalls recorded in recent years (an annual average of 4.6% of GDP in 2014-18). The deficits will be financed by a combination of foreign direct investment and new borrowing, before the current account shifts into surplus; this will allow foreign-exchange reserves to rise and will boost import cover from an estimated 3.2 months in 2018 to 3.8 months in 2023.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 10 Forecast summary Forecast summary (% unless otherwise indicated) 2018a 2019b 2020b 2021b 2022b 2023b Real GDP growth 6.3 6.5 5.7 5.4 6.1 6.4 Gross agricultural production growth 4.8c 3.4 4.0 3.3 3.5 3.6 Consumer price inflation (av) 9.8 9.6 9.5 8.5 9.1 9.3 Consumer price inflation (end-period) 9.4 9.5 9.4 8.5 9.5 9.3 Short-term interbank rate 17.0 16.5 16.0 15.5 16.5 17.5 Government balance (% of GDP) -3.4 -4.6 -5.2 -4.6 -3.8 -3.1 Exports of goods fob (US$ bn) 14.9 15.5 15.9 17.4 20.7 23.2 Imports of goods fob (US$ bn) 13.1 14.0 14.9 15.9 16.9 18.2 Current-account balance (US$ bn) -1.2c -1.2 -1.4 -1.1 0.3 1.0 Current-account balance (% of GDP) -1.8c -1.8 -2.0 -1.5 0.3 1.1 External debt (year-end; US$ bn) 20.7c 23.3 23.0 22.6 22.4 22.0 Exchange rate GH¢:US$ (av) 4.58 5.31 5.86 6.18 6.35 6.50 Exchange rate GH¢:¥100 (av) 4.15 4.82 5.37 5.89 6.32 6.76 Exchange rate GH¢:€ (endperiod) 5.52 6.72 7.41 7.65 8.01 8.16 Exchange rate GH¢:SDR (endperiod) 6.70 7.88 8.71 8.95 9.35 9.52 a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimates.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 11 Data and charts Annual data and forecast

2014a 2015a 2016a 2017a 2018b 2019c 2020c GDP Nominal GDP (US$ m) 53,697 48,605 55,016 59,029 65,561a 64,854 68,138 Nominal GDP (GH¢ m) 155,433 180,399 215,077 256,671 300,596a 344,125 399,477 Real GDP growth (%) 2.9 2.2 3.4 8.1 6.3a 6.5 5.7 Expenditure on GDP (% real change) Private consumption 4.1 -0.3 -2.6 11.3 -0.3a 9.8 5.0 Government consumption 24.5 -8.9 -21.9 -35.9 73.7a 11.8 6.3 Gross fixed investment -1.1 -2.7 12.2 -1.8 -5.0a 7.2 5.2 Exports of goods & services -5.8 -0.3 14.8 16.5 10.3a 15.0 5.4 Imports of goods & services -14.4 7.9 -1.1 7.9 4.6a 5.1 4.3 Origin of GDP (% real change) Agriculture 0.9 2.3 2.9 6.1 4.8 3.4 4.0 Industry 1.1 1.1 4.3 15.7 10.6 8.7 6.0 Services 5.4 3.0 2.8 3.3 2.7 5.5 6.0 Population and income Population (m) 27.0 27.6 28.2 28.8 29.5 30.1 30.8 GDP per head (US$ at PPP) 4,033 4,072 4,171 4,493 4,759 5,045 5,331 Fiscal indicators (% of GDP) Central government budget revenue 15.9 17.8 14.9 15.4 15.9a 16.1 15.8 Central government budget expenditure 22.8 22.6 21.8 20.9 19.4a 20.7 21.1 Central government budget balance -6.8 -4.9 -6.9 -5.5 -3.4a -4.6 -5.2 Public debt 53.2 57.5 60.4 57.4 53.5 56.4 55.2 Prices and financial indicators Exchange rate GH¢:US$ (av) 2.89 3.71 3.91 4.35 4.58a 5.31 5.86 Exchange rate GH¢:€ (av) 3.85 4.12 4.33 4.91 5.42a 6.16 7.15 Consumer prices (end-period; % change) 17.0 17.7 15.4 11.8 9.4a 9.5 9.4 Stock of money M1 (% change) 34.5 20.1 24.9 14.0 13.0 13.5 14.0 Stock of money M2 (% change) 36.8 26.1 22.0 16.7 16.5 13.0 15.0 Current account (US$ m) Trade balance -1,383 -3,144 -1,773 1,187 1,779a 1,464 1,011 Goods: exports fob 13,217 10,321 11,137 13,835 14,868a 15,496 15,866 Goods: imports fob -14,600 -13,465 -12,910 -12,648 -13,089a -14,032 -14,855 Services balance -2,602 -1,167 -1,293 -2,873 -2,559 -2,168 -1,971 Primary income balance -1,717 -1,111 -1,222 -2,741 -3,198 -3,435 -3,235 Secondary income balance 2,009 2,598 1,457 2,424 2,768 2,945 2,842 Current-account balance -3,695 -2,824 -2,832 -2,003 -1,211 -1,193 -1,353 External debt (US$ m) Debt stock 18,370 20,633 21,372 21,369 20,671 23,302 23,018 Debt service paid 842 1,060 1,886 2,154 3,852 3,278 3,438 Principal repayments 482 618 1,244 1,338 3,037 2,211 2,311 Interest 360 443 642 817 816 1,067 1,127 International reserves (US$ m) Total international reserves 5,247 5,503 5,487 6,683 6,020 6,380 6,631 a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. Sources: IMF, International Financial Statistics; Bank of Ghana.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 12 Quarterly data 2017 2018 2019 1 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Qtr Prices Consumer prices (2012=100) 198.7 201.4 205.1 212.0 218.1 221.1 224.5231.4 Consumer prices (% change, year on 12.6 12.1 11.7 10.4 9.8 9.8 9.4 9.2 year) Financial indicators Exchange rate GH¢:US$ (av) 4.25 4.38 4.39 4.42 4.43 4.70 4.80 5.03 Exchange rate GH¢:US$ (endperiod) 4.36 4.39 4.41 4.40 4.52 4.78 4.82 5.08 Deposit rate (av; %) 14.9 14.0 13.0 13.0 12.3 11.5 n/a n/a Discount rate (end-period; %) 22.5 21.0 20.0 18.0 17.0 17.0 n/a n/a Treasury-bill rate (av; %) 22.9 21.3 20.3 18.5 17.0 16.2 16.1 n/a M2 (endperiod; GH¢ bn) 59,903.859,491.166,170.167,318.568,402.273,821.777,088.2 n/a M2 (% change, year on year) 28.9 23.1 16.7 15.8 14.2 24.1 16.5 n/a GSE all-share index (end-period; Dec 1,965 2,326 2,580 3,367 2,879 3,001 2,572 n/a 31st 2010=1000) Sectoral trends Gold price, London (US$/troy oz) 1,257.7 1,278.0 1,275.3 1,328.9 1,306.6 1,212.6 1,228.8 n/a Cocoa beans price, New York & 1,981.0 1,991.8 2,047.6 2,192.9 2,565.1 2,241.2 2,175.9 n/a London (US$/tonne ) Foreign reserves (US$ m) Reserves excl gold (end-period) 7,135 6,095 6,651 6,077 6,316 5,645 5,935 n/a Sources: IMF, International Financial Statistics; Bank of Ghana, Quarterly Economic Bulletin, Statistical Bulletin; Ghana Stock Exchange.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 13 Monthly data Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Exchange rate GH¢:US$ (av) 2016 3.806 3.872 3.847 3.816 3.813 3.884 3.938 3.943 3.956 3.965 3.973 4.099 2017 4.233 4.371 4.482 4.194 4.236 4.330 4.365 4.383 4.402 4.379 4.394 4.410 2018 4.419 4.417 4.411 4.403 4.412 4.460 4.645 4.706 4.755 4.790 4.789 4.812 Exchange rate GH¢:US$ (endperiod) 2016 3.829 3.876 3.835 3.783 3.840 3.924 3.943 3.944 3.970 3.962 4.030 4.198 2017 4.269 4.476 4.315 4.185 4.284 4.361 4.372 4.397 4.392 4.374 4.410 4.413 2018 4.422 4.417 4.402 4.406 4.420 4.521 4.692 4.722 4.775 4.788 4.804 4.818 Real effective exchange rate (1997=100; CPI-based) 2016 57.47 56.56 57.07 56.98 57.92 57.87 58.46 58.35 58.92 59.94 61.22 60.81 2017 58.63 56.74 55.82 60.00 59.16 57.71 56.83 56.30 56.05 57.24 57.67 57.58 2018 55.57 55.59 56.22 56.86 58.77 59.17 57.35 57.96 57.81 58.23 58.82 59.63 M1 (% change, year on year) 2016 28.4 16.9 18.6 18.7 23.6 18.1 18.3 24.7 24.7 25.2 29.3 24.9 2017 25.7 29.0 28.0 25.3 n/a n/a n/a n/a n/a n/a n/a n/a 2018 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a M2 (% change, year on year) 2016 25.2 19.3 18.1 16.3 16.8 12.0 25.9 20.5 22.3 19.8 20.8 22.0 2017 26.7 29.9 28.2 26.6 23.7 28.9 30.0 24.9 23.1 25.5 20.3 16.7 2018 12.5 12.2 15.8 17.5 18.0 14.2 16.8 23.1 24.1 17.2 19.2 16.5 Deposit rate (av; %) 2016 13.5 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 2017 13.0 15.0 15.0 15.3 15.0 14.5 14.5 14.5 13.0 13.0 13.0 13.0 2018 13.0 13.0 13.0 11.5 12.8 12.8 11.5 11.5 11.5 11.5 11.5 11.5 3-month money-market rate (end-period; %) 2016 25.3 25.4 25.4 25.4 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.3 2017 25.2 25.2 24.9 23.3 23.1 22.1 21.9 21.0 20.9 20.9 20.7 19.3 2018 19.2 18.3 18.1 17.5 17.3 16.4 16.2 16.2 16.2 16.2 16.1 16.1 Gold price, London (US$/troy oz) 2016 1,098 1,200 1,245 1,242 1,261 1,276 1,337 1,340 1,327 1,267 1,238 1,157 2017 1,192 1,234 1,231 1,267 1,246 1,260 1,237 1,283 1,314 1,280 1,282 1,264 2018 1,331 1,331 1,325 1,335 1,303 1,282 1,238 1,202 1,198 1,215 1,221 1,250 Cocoa beans price, New York & London (US$/tonne ) 2016 2,952 2,916 3,074 3,079 3,099 3,121 3,050 3,033 2,881 2,711 2,479 2,295 2017 2,194 2,034 2,064 1,961 1,984 1,998 1,989 1,989 1,998 2,097 2,128 1,918 2018 1,952 2,123 2,504 2,625 2,660 2,411 2,357 2,172 2,195 2,134 2,185 2,208 Foreign-exchange reserves excl gold (US$ m) 2016 5,539 5,232 5,397 5,652 5,199 4,900 4,750 4,605 4,578 5,710 5,889 5,923 2017 6,164 6,011 6,160 8,052 7,859 7,605 7,269 6,845 6,621 6,709 7,079 7,287 2018 6,838 6,674 6,773 6,633 7,567 7,026 6,767 6,425 6,500 6,096 6,598 n/a Sources: IMF, International Financial Statistics; Haver Analytics.

Basic data Land area 238,537 sq km Population 28.8m (2017, IMF) Main towns Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 17

Population in ’000 (2013, World Gazetteer estimates) Accra (capital): 2,344 Kumasi: 2,069 Tamale: 563 Achiaman: 299 Takoradi: 268 Cape Coast: 227 Obuasi: 180 Tema: 162 Sekondi: 147 Climate Tropical Weather in Accra (altitude 27 metres) Hottest months, March, April, 2335°C; coldest month, August, 2227°C; driest month, January, 15 mm average rainfall; wettest month, June, 178 mm average rainfall Languages English (official), Twi, Ewe, Fante, Ga, Hausa Measures Metric system Currency Cedi (GH¢) = 100 pesewas. Average exchange rate in 2018: GH¢4.58:US$1 Time GMT Public holidays New Year’s Day (January 1st); Independence Day (March 7th); Good Friday; Easter Monday; Labour Day (May 2nd); Republic Day (July 1st); Farmers’ Day (December 2nd); December 25th 26th

Political structure Official name Republic of Ghana Form of state

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 19 Unitary republic Legal system A new constitution, based on the US model, was approved by referendum in April 1992 National legislature Parliament; 275 members elected by universal suffrage every four years National elections December 2016 (presidential and parliamentary); next elections November 2020 Head of state President, elected by universal suffrage for a maximum of two four-year terms; Nana Akufo-Addo won the December 2016 presidential election National government Cabinet appointed by the president, but subject to parliamentary approval Main political parties The ruling New Patriotic Party (NPP); the National Democratic Congress (NDC), the main opposition party; other parties include the Progressive People’s Party (PPP), People’s National Convention (PNC), Convention People’s Party (CPP) and National Democratic Party (NDP), but none of these smaller parties currently has parliamentary representation Key ministers President: Nana Akufo-Addo Vice-president: Mahamudu Bawumia Agriculture: Owusu Afriyie Akoto Attorney-general: Gloria Akuffo Aviation: Kofi Adda Communications: Ursula Owusu Ekuful Defence: Dominic Nitiwul Education: Matthew Opoku Prempeh Employment & social welfare: Ignatius Baffuor Awuah Energy: John Peter Amewu Environment, science & technology: Kwabena Frimpong-Boateng Finance: Ken Ofori-Atta Foreign affairs: Shirley Ayorkor Botchwey Health: Kwaku Agyemang-Manu Interior: Ambrose Dery Lands & natural resources: Kwaku Asomah-Cheremeh Local government: Hajia Alima Mahama Roads & highways: Kwesi Amoako Atta Sanitation & water resources: Cecilia Abena Dapaah Trade & industry: Alan John Kyerematen Transport: Kwaku Ofori Asiamah

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 20 Works & housing: Samuel Atta Akyea Central bank governor Ernest Addison

Generated on May 13th 2019 The following articles have been written in response to events occurring since our most recent forecast was released, and indicate how we expect these events to affect our next forecast. Politics Forecast updates EU promises Gulf of Guinea funding worth US$173m May 8, 2019: International relations Event On May 6th the EU's head of co-operation of the delegation to Nigeria and ECOWAS, Kurt Cornelis, announced €155m (US$173m) worth of funding for regional maritime security programmes. Analysis The announcement was made at a two-day maritime stakeholders meeting in the Nigerian capital, Abuja, for Economic Community of West African States (ECOWAS) members and Mauritania. The EU's representative said that the money would be used to support programmes fighting piracy, drug-trafficking, smuggling and illegal fishing off Africa's most important sea route. Tackling maritime security challenges there has long been a policy priority for both the West African bloc's largest member, Nigeria, and European nations (especially France). NATO also operates the Maritime Domain Awareness for Trade—Gulf of Guinea (MDATGoG) mission to provide guidance on security risks facing the Gulf of Guinea maritime community. The EU is encouraging greater co-operation between West African nations in the Gulf, where territorial disputes have historically been more common than co-operation (although limited resources have also played a role in the lack of joint initiatives between countries to tackle threats at sea). According to ECOWAS, however, West African states jointly lose US$2bn per year to illegal fishing and other forms of resource theft off the coast in the Gulf, in addition to the financial burdens of tackling maritime security threats from pirate gangs, drug-traffickers and militant groups such as Nigeria's Movement for the Emancipation of the Niger Delta. The Gulf of Guinea was reported by the International Maritime Bureau as the most dangerous region for international seafarers to travel through in its 2018 report on global piracy. This has led to ECOWAS members drawing up joint policies such as the ECOWAS Integrated Maritime Security and Regional Strategy to fight illicit drug-trafficking and a West African Regional Policy for Fisheries; the EU's funding will go towards programmes that support these initiatives, such as the Improved Regional Fisheries Governance in Western Africa Programme to tackle illegal fishing. The Abuja meeting that Mr Cornelis attended was intended to ensure the various stakeholders present would discuss how best to co-ordinate their actions in the region in order to avoid the unnecessary duplication of effort. Facing so many challenges, however, ECOWAS will contain rather than eradicate illegal activities in the Gulf. Impact on the forecast Our forecast that pirate attacks and other forms of criminal activity will continue to disrupt economic activity in the Gulf of Guinea over 2019-20 remains unchanged.

Country Report May 2019 www.eiu.com © Economist Intelligence Unit Limited 2019 Ghana 22 Economy Forecast updates EXIM US extends credit line to support industrialisation May 7, 2019: Economic growth Event The Export-Import Bank of the United States (EXIM US) has extended a US$300mn credit line to support companies operating under Ghana's One-district, One-factory (1D1F) programme. Analysis Under the deal, EXIM US will advance loans through the Ghana Export-Import Bank to the companies for the purchase of machinery and other equipment from the US to support their manufacturing activities. Each company will be able to access up to US$10mn. The US also supports private-sector development and export-led industrialisation in Ghana through the Africa Growth and Opportunities Act. Ghana's exports to the US have grown under this programme, but are dominated by agricultural and energy-related products, rather than products with higher value-added (such as textiles, machinery or processed goods). The governing New Patriotic Party (NPP) administration has prioritised private-sector growth and broad industrialisation in order to satisfy an electorate keen to see greater job creation. To this end, the NPP has initiated a number of policies to promote private-sector development and growth in the non-oil economy, such as the 1D1F initiative and the National Industrial Revitalisation Programme. Despite these ongoing government efforts to diversify the economy and promote industrialisation, investment levels remain generally low. Accordingly, many products need to be imported into the country, rather than produced domestically, and exports are dominated by commodities. Improved access to credit will help to support growth in Ghana's non-oil economy and the growth of domestic production capabilities, but further reforms will be necessary. Indeed, industrialisation and broad-based private-sector development take time and require a supportive business environment and physical infrastructure, such as transportation links and an electricity supply, among other things. Moreover, skills shortages among the domestic workforce remain an issue, as the quality of education and technical skills training in Ghana is low. Many domestic firms continue to struggle in such a weak business climate. Impact on the forecast We continue to believe that industrialisation and the emergence of a competitive non-oil economy in Ghana will be a slow process, with myriad barriers to growth. Although the government has made some progress under a variety of initiatives, its industrialisation policies are too ambitious in their scope, and broader weaknesses in the economy will need to be addressed before widespread industrialisation can occur.

Companies shortlisted for Ghana-Burkina Faso railway link May 10, 2019: Economic growth Event Four companies have been shortlisted to compete for the construction of the Ghana-Burkina Faso Railway interconnection project. Analysis The railway is designed to facilitate increased trade flows between the two countries. According to statistics from UN Comtrade, Ghana exported goods totalling US$478m to Burkina Faso in 2017 (predominantly plastic products, with some agricultural products), and Burkina Faso exported goods totalling US$14.1m to Ghana in the same year (predominantly delivery truck re-exports and agricultural products). Burkina Faso's exports to Ghana constitute 0.6% of its total exports, and Ghana's exports to Burkina Faso constitute 2.8% of its total exports. In 2018 Ghana and Burkina Faso announced their intention to formulate agreements across railway and road transport, agriculture, water management, trade and energy. Increased trade flows between the two economies will facilitate better political co-operation and will help the two countries to reach agreements on issues that have previously created tensions (such as annual spillages at the Bagre Dam in Burkina Faso, the connection of electricity from Ghana to Burkina Faso and how to deal with the Fulani herdsmen issue). The project is to be on a built, operate and transfer basis. This will allow the contractor to receive a concession from the two governments to finance the project. Construction is scheduled to begin in the first quarter of 2020. The four shortlisted finalists are China Railway Construction Bridge Engineering Group, China Railway Number 10 Consortium, African Global Development and Frontline Consortium. Both Ghana and Burkina Faso have long sought to strengthen their trade by supporting physical infrastructure. Weak physical infrastructure has, among a range of other factors, hampered the industrialisation and economic development agendas of both governments. Impact on the forecast We believe that improving transport links between the two countries will increase trade flows, although such flows will probably remain relatively small shares of total exports. Nonetheless, the railway link is part of broader measures to strengthen co-operation between the two countries, which we expect to continue to improve.