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Ghana Business Forecast Report Q3 2014

  • May 2014
  • -
  • Business Monitor International
  • -
  • 36 pages

Core Views

Economic growth will slow down in 2014 as surging inflation and various macroeconomic imbalances provoke weakening private consumption as well as a deterioration in investor sentiment. Over a longer-term (ie five-year) horizon, foreign investment inflows will be robust thanks to Ghana’s abundant natural resources, and relative political stability. The current account deficit and fiscal deficits will remain key structural weaknesses in the economy. Ghana’s reputation for political stability remains intact following the December 2012 elections and the nation is widely regarded as a safe place to do business.

Major Forecast Changes

We have revised our 2014 real GDP growth forecast down to 4.7% from 5.1% previously, owing to severe currency weakness and signs of weakness in the consumer sector.

Table Of Contents

Ghana Business Forecast Report Q3 2014
Executive Summary . 5
Core Views 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis .. 7
BMI Political Risk Ratings .. 7
Domestic Politics 8
On The Ground: Keeping Faith In Government .8
Our analyst in Accra found that although people are facing economic difficulty and blame the government for this, they nevertheless
have faith that the authorities can pull the country out of the current quagmire. Large-scale protests are unlikely.
Table: Political Overview .8
Long-Term Political Outlook . 9
Oil To Prove A Critical Test For The Polity ..9
Ghana's political risk profile is relatively favourable, especially in the context of West Africa. However, oil revenues will require careful
management, presenting a formidable test for the government over the coming decade.
Chapter 2: Economic Outlook . 13
SWOT Analysis 13
BMI Economic Risk Ratings 13
Economic Activity . 14
Deteriorating Prospects For Growth .14
We have revised downward our forecast for real GDP growth in Ghana in 2014, to 4.7% from 5.1% previously. This is predicated
on several negative developments including severe currency depreciation, weakness in the consumer sector and investor concerns
surrounding the government budget.
table: Economic Activity .14
Fiscal Policy . 15
Will Ghana Seek External Assistance? 15
Macroeconomic stability is under threat in Ghana, due to the twin deficits on the fiscal account and current account. The government will
seek some form of external assistance, the most likely option being limited technical assistance from the IMF.
table: Fiscal Policy ..16
Balance Of Payments . 19
Sustained C/A Deficit Will Weigh On Cedi .19
We forecast that Ghana's current account deficit will shrink from 14.5% of GDP in 2013 to 11.4% of GDP in 2014 owing to enhanced
cocoa and oil revenues. This will nevertheless be a sizeable deficit which will exert depreciatory pressure on the cedi.
table: Current Account ..19
Regional Economic Outlook .. 21
African Agriculture: The Opportunities Of Underdevelopment 21
Farms in Sub-Saharan Africa have the lowest crop yields in the world and inefficient production is holding hundreds of millions of people
in poverty. By addressing structural issues - especially freeing up credit - Africa could turn 500mn farmers into an engine of economic
growth.
Chapter 3: 10-Year Forecast . 25
The Ghana Economy To 2023 25
Oil To Boost Growth Over The Long Term 25
We hold a positive long-term outlook on Ghana, forecasting that annual real GDP growth will average more than 6.0% over the coming
10 years. The ramping up of domestic oil production will provide significant impetus to the economy, allowing the mitigation of fiscal and
current account drags.
table: Long-Term Macroeconomic Forecasts 25
Chapter 4: Business Environment 27
SWOT Analysis 27
BMI Business Environment Risk Ratings .. 27
Business Environment Outlook 28
Institutions . 28
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS 28
Table: BMI LEGAL FRAMEWORK RATING .29
Table: LABOUR FORCE QUALITY ..30
Infrastructure 31
TABLE: AFRICA - ANNUAL FDI INFLOWS 31
Table: TRADE AND INVESTMENT RATINGS 32
Market Orientation . 33
TABLE: TOP EXPORT DESTINATIONS, (USDMN) 33
Operational Risk . 34
Chapter 5: BMI Global Assumptions .. 35
Global Outlook . 35
Growth Increasingly Polarised ..35
Table: Global Assumptions ..35
Table: Developed States, Real GDP GrowtH, % 36
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % .. 36
Table: Emerging Markets, Real GDP Growth, % ..37

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