Ghana’s rapid growth (7% in 2017-19) was halted by the COVID-19 pandemic, the March 2020 lockdown, and a sharp decline in commodity exports with an overall GDP as low as 0.4%. The economic slowdown had a considerable impact on households. The poverty rate is estimated to have slightly increased from 25% in 2019 to 25.5% in 2020.
Ghana’s economy has effectively rebounded from the COVID-19 induced slowdown. Growth is estimated to have reached 4.1% in 2021, is expected to be broad-based in 2022 and projected to reach 5.5% in 2022.
The overall fiscal deficit doubled to 15.2% in 2020 and public debt increased to 81.1% in 2020, placing Ghana at a significant risk of debt distress. While some consolidation happened in 2021 with the deficit declining to 11.3%, more significant effort will be required to alter the debt dynamics meaningfully. Provisional fiscal data for first half of 2021 suggest that the authorities cut spending to make up for revenue shortfalls. The overall fiscal deficit was 5.1% of GDP.
Headline inflation averaged 7.8% in the first half of 2021 and ended at 10% as full year average. This was due to exchange rate, food and non-food price hikes and has continued in the first quarter of 2022. As of end-February 2022, inflation reached 15.7%, the highest level since December 2016.
Fueled by the domestic recovery, imports expanded faster than exports in early 2021 while external demand for commodities remained subdued. As a result, current account deficit is estimated to narrow 2.4% of GDP compared to 2.3% in 2020.
Ghana’s economy is projected to remain relatively strong over the medium term, supported by higher prices for key exports and strong domestic demand. Growth is projected to reach 5.5% in 2022 and average 5.3% over 2022. Growth is expected to be broad-based led by agriculture and services and relatively stronger industry sector.