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Ghana Country Risk Report 2016

  • February 2016
  • -
  • Business Monitor International
  • -
  • 39 pages

Core Views

An uptick in investor sentiment, the launch of the TEN oilfields andthe waning of the electricity crisis will lead to an uptick in real GDPgrowth in Ghana in 2016 following two years of macroeconomicturmoil. We forecast expansion of 4.9% and 5.8% in 2016 and 2017,respectively.The November 2016 presidential and parliamentary elections inGhana will be closely contested between incumbent John Mahamaand primary challenger Nana Akufo-Addo. President Mahama willseek to present himself as strong on corruption and policy failurein the coming months, but cutting the fiscal deficit while retainingsupport will take careful balancing.

The Bank of Ghana's Monetary Policy Committee opted to leave itskey policy rate unchanged at 26.00% at its January meeting, indicatingto us that it has in fact reached the end of its hiking cycle. Wenow expect that rates will be maintained at current levels throughH1 before 100 basis points of cuts are enacted in the second halfof the year, taking the year-end policy rate to 25.00%.The Ghanaian government is implementing some difficult reformsin 2016, which will help it to bring in the budget deficit even whilethe global price of oil – on which the government is becoming increasinglyreliant for revenues – is looking extremely weak. Thesenew tax measures will see the deficit continue to decline over thenext several years, so long as the government stands its ground –particularly as the November 2016 presidential elections approach.We forecast the shortfall will be equivalent to 6.4% of GDP in 2016,and 5.2% in 2017.

Ghana's current account deficit in 2016 and 2017 will be widerthan we had previously projected owing to a dimmer outlook for thecountry's primary commodity exports, oil in particular. We forecastthat the deficit will stand at 7.3% of GDP in 2016 and 6.9% in 2017,following an estimated 8.4% in 2015. While our expectation for adiminishing shortfall remains, the deficit will not be reduced as quicklyas we projected in our last quarterly report. We had expected thatthe deficit would fall from a projected 8.0% of GDP in 2015 to 6.9%in 2016 and 5.9% in 2017.

Table Of Contents

Ghana Country Risk Report 2016
Executive Summary 5
Core Views5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Growth Will Pick Up In 20168
An uptick in investor sentiment, the launch of the TEN oilfields and the waning of the electricity crisis will lead to an uptick in real GDP
growth in Ghana in 2016 following two years of macroeconomic turmoil We forecast expansion of 49% and 58% in 2016 and 2017
respectively
GDP By Expenditure Outlook 9
TABLE: PRIVATE CONSUMPTION FORECASTS 9
TABLE: GOVERNMENT CONSUMPTION FORECASTS 9
TABLE: FIXED INVESTMENT FORECASTS 9
TABLE: NET EXPORTS FORECASTS 9
Fiscal Policy And Public Debt Outlook 10
Structural Reforms Will Narrow Budget Deficit10
Ghana's budget deficit will decline over the coming years While the fall in the oil price will dent revenues, the government is striving to
curb expenditure and widen the tax base under the guidance of the IMF
Structural Fiscal Position 11
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES 12
External Trade And Investment Outlook 13
Current Account Will Be Hit By Oil Price Decline13
Ghana's balance of payments will remain under considerable pressure in 2016 and 2017, and our outlook is less positive than it was
three months ago This is primarily due to a renewed collapse in the oil price
Outlook On External Position 14
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE 14
TABLE: TOP 5 GOODS IMPORTS IN 2014 15
TABLE: TOP 5 GOODS EXPORTS IN 2014 15
Monetary Policy 16
Monetary Policy Normalisation Will Begin In H216
The Bank of Ghana will maintain rates through the first half of 2016, but slowing price growth will enable the bank to begin a
normalisation of monetary policy in the second half of the year
Monetary Policy Framework 17
Chapter 2: 10-Year Forecast 19
The Ghanaian Economy To 2025 19
Oil To Boost Growth Over The Long Term19
We hold a positive long-term outlook on Ghana's economy, forecasting that annual real GDP growth will average more than 6% over the
coming 10 years The ramping up of domestic oil production will provide a significant impetus to the economy, allowing the mitigation of
fiscal and current account drags
TABLE: LONG-TERM MACROECONOMIC FORECASTS 19
Chapter 3: Political Outlook 21
SWOT Analysis 21
BMI Political Risk Index 21
Domestic Politics 22
2016 Presidential Election Will Be Closely Contested22
The November 2016 presidential and parliamentary elections in Ghana will be closely contested between incumbent John Mahama and
primary challenger Nana Akufo-Addo President Mahama will seek to present himself as strong on corruption and policy failure in the
coming months, but cutting the fiscal deficit while retaining support will take careful balancing
TABLE: POLITICAL OVERVIEW 22
Long-Term Political Outlook 23
Oil: A Critical Test For The Polity23
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 4: Operational Risk 27
SWOT Analysis 27
Operational Risk Index 27
Operational Risk 28
TABLE: OPERATIONAL RISK 28
Trade Procedures And Governance 29
TABLE: SUB-SAHARAN AFRICA - TRADE PROCEDURES AND GOVERNANCE 30
Vulnerability To Crime 31
TABLE: IMPORT AND EXPORT DOCUMENTS 31
TABLE: TRADE PROCEDURES BREAKDOWN 31
Chapter 5: BMI Global Macro Outlook 35
Global Macro Outlook 35
Downside Risks Gather Momentum35
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
TABLE: MACROECONOMIC DATA and FORECASTS 39

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