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Ghana Business Forecast Report Q4 2014

  • August 2014
  • -
  • Business Monitor International
  • -
  • 35 pages

Core Views
Economic growth in Ghana will be buoyant over 2015-2018 thanks to improving power supplies, rising oil production and strong investment inflows – the latter encouraged by IMF policy oversight. Foreign investment inflows will be robust thanks to Ghana's abundant natural resources and relative political stability. The current account deficit and fiscal deficit will remain key structural weaknesses in the economy. Peaceful protests against economic hardship will continue, despite the fact that the government has approached the IMF for assistance. Ghanaians are wary of the conditions that may be attached to IMF support.

Major Forecast Changes
We have adjusted our budget forecasts following news that Ghana will enter an IMF program. We no longer expect the budget deficit to swell in the next election year – 2016 – thanks to an anticipated improvement in policy monitoring.

Table Of Contents

Ghana Business Forecast Report Q4 2014
Executive Summary 5
Core Views...5
Major Forecast Changes.5
Key Risks To Outlook5
Chapter 1: Political Outlook.. 7
SWOT Analysis 7
BMI Political Risk Ratings.. 7
Domestic Politics 8
On The Ground: Protests Will Rumble On..8
Peaceful protests against economic hardship will continue in Ghana, despite the fact that the government has approached the IMF for
assistance. Ghanaians are wary of the conditions that may be attached to IMF support.
Table: Political Overview8
Long-Term Political Outlook. 10
Oil To Prove A Critical Test For Polity.10
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
Economic Recovery On The Horizon...14
Real GDP growth in Ghana will be buoyant over 2015-2018 thanks to improving power supplies, rising oil production and strong
investment inflows - the latter encouraged by IMF policy oversight. We forecast that headline growth will fluctuate between 5.9% and
8.0%.
Tab le: Ec onomic Acti vit y14
Monetary Policy . 16
BoG Hawkish But Hamstrung16
The Bank of Ghana will hike interest rates by an additional 100bps over the coming months but inflation will remain firmly above target
owing to severe currency depreciation which will push up import costs. High inflation, elevated interest rates and rapid currency losses
will persist until the government budget is brought under control.
Tab le: Moneta ry Polic y..16
Fiscal Policy .. 17
Supplementary Budget: Key Takeaways..17
The Ghanaian finance ministry has spoken of 'bold paradigm shifts' in its supplementary budget, but fiscal consolidation will be a slow
process. The wide budget deficit will continue to weigh on investor confidence and the Ghanaian cedi.
Table: Fiscal Policy18
Balance Of Payments .. 19
C/A Deficit Contracting But Will Weigh On Cedi19
We forecast that Ghana's current account deficit will shrink from 14.5% of GDP in 2013 to 12.4% of GDP in 2014 and 7.1% of GDP in
2015 owing to reduced import demand as well as enhanced cocoa and oil revenues. This will nevertheless be a sizeable deficit which
will exert depreciatory pressure on the cedi.
Table: Current Account.20
Chapter 3: 10-Year Forecast 23
The Ghanaian Economy To 2023.... 23
Oil To Boost Growth Over The Long Term....23
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.
tab le: Long-Term Mac roeconomic Forecasts ...23
Chapter 4: Business Environment 25
SWOT Analysis... 25
BMI Business Environment Risk Ratings 25
Business Environment Outlook. 26
Institutions 26
TABLE : BMI BUSINE SS AND OPER ATION RISK RATINGS....26
Tab le: BMI LE GAL FRAMEWOR K RATING....27
Table: LABOUR FORCE QUALITY..28
Infrastructure. 29
TABLE : AFRICA - ANN UAL FDI INFLO WS.29
Tab le: TRADE AND INVE STMEN T RATINGS30
Market Orientation... 31
TABLE : TOP EXPOR T DESTINATION S, (USDMN)....31
Operational Risk. 32
Chapter 5: BMI Global Assumptions. 33
Global Outlook.... 33
US Revision Drags Down Forecast.33
Tab le: Globa l Assumpti ons33
Table: Developed States, Real GDP GrowtH, %..34
Tab le: BMI VER SUS BLOO MBER G CON SEN SUS RE AL GDP GRO WTH FORE CASTS, %.. 34
Tab le: Em ergi ng Markets , Real GDP Growth , %.35

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