REPORT BY: KWEKU BOLTON
Ghana’s economy has experienced significant challenges and opportunities in recent years. This report provides a detailed analysis of the current economic landscape, highlighting key statistics and trends that shape the nation’s financial health and stability. This report is also expected to encourage other African countries to improve their economic growth, especially those experiencing economic decline.
Economic Overview
Ghana’s economy is one of the leading economies in Africa, with a GDP of approximately 73.36 billion USD in 2021. The GDP per capita was estimated at nearly 2.3 thousand USD in 2022 and is expected to reach over 2.5 thousand USD by 2025. The country has a diverse economic base, including agriculture, tourism, manufacturing, mining, oil and gas, and services, contributing to its robust economic structure.
The Trading Economists’ data emphasised GDP from Agriculture in Ghana, which recorded 9,196.80 million GHS in the second quarter and decreased slightly to 9,158.20 million GHS in the third quarter of 2024. Historically, GDP from agriculture in Ghana averaged 6,955.26 million GHS from 2006 to 2024, reaching a peak of 11,619.42 million GHS in the fourth quarter of 2023.
In 2022, the Travel and Tourism Sector contributed around 3.4 billion USD to Ghana’s GDP, up from 3.1 billion USD in the preceding year. In 2023, this figure was forecasted to exceed 3.6 billion USD. Ghana remains a major destination for tourists travelling to West Africa, benefiting from its English-speaking status.
Ghana’s Mining Sector is a significant contributor to the country’s GDP, particularly in the first quarter of 2024, with a notable 12.9% contribution to economic growth. GDP from mining increased to 7,202.26 million GHS in the third quarter of 2024, up from 6,565.12 million GHS in the second quarter.
As of the second quarter of 2024, the Manufacturing Sector in Ghana contributed approximately 4.7 billion GHS (around 317 million USD) to the country’s GDP.
Statista data highlighted that the contribution of Oil and Gas to Ghana’s GDP was projected to increase by 14.2% in 2024. However, in 2021, the growth rate registered a drop of 12.6%. The sector is projected to grow by 5% by the end of 2024.
Growth and Development
The African Development Bank Group data indicated that real GDP growth decelerated from 3.8% in 2022 to 2.9% in 2023, reflecting spillover effects from global economic conditions and internal macroeconomic challenges. The growth was led by the industrial sector on the supply side and private consumption on the demand side. The agricultural sector, despite being an important part of the economy, has faced challenges such as climate change and inadequate infrastructure, impacting overall productivity.
Inflation and Currency Depreciation
In 2022, inflation was recorded at 31.5%, and it escalated to 40.3% in 2023, primarily driven by the rise in food prices and the depreciation of the currency. The Ghanaian cedi depreciated sharply against major currencies, losing over 60% of its value in 2022 alone. The exchange rate surged from 12.0356 GHS/USD at the beginning of 2024 to 15.8 GHS/USD in the third quarter of 2024. This depreciation has increased the cost of imports, further fuelling inflationary pressures.
At the roundtable discussion on economic indicators in September 2022, analysts from the Institute of Economic Affairs (IEA), indicated that Ghana has a history of high inflation compared to its peers in Africa and elsewhere. Government borrowing to finance deficits also increases interest rates and the cost of production, which can be passed on in higher prices of goods. Director of Research at the IEA, Dr. John Kwakye, said that food prices and the exchange rate, in particular, are major drivers of inflation in the country. Fuel shocks also impart occasional upward pressure on the inflation profile. The economists and financial analysts emphasised that the government must ensure adequate food access and affordability by promoting production, highlighting a new approach for managing inflation that requires the Bank of Ghana and the government to work together to reduce exchange rate volatilities.
Public Debt and Fiscal Deficit
Ghana’s public debt surged, with the debt-to-GDP ratio rising from 56% in 2016 to over 90% by 2023. The fiscal deficit narrowed from 11.8% of GDP in 2022 to 4.5% in 2023 due to fiscal consolidation and improved revenue performance. The Bank of Ghana (BoG) reported in September 2024 that Ghana’s public debt had surged to GH¢761.2 billion ($51.1 billion), accounting for 75.7% of GDP. This marks a sharp rise from GH¢633.3 billion recorded the previous year and GH¢587 billion in 2022. However, the external debt burden remains a significant challenge, with over 80% of Ghana’s external debt denominated in US dollars. This high level of debt has implications for future fiscal policy and economic stability.
International Reserves and Financial Sector
Gross international reserves shrank from 6.3 billion USD (2.7 months of import cover) at the end of 2022 to 5.0 billion USD (2.3 months) in November 2023. The financial sector remained sound, with a capital adequacy ratio above the 10% threshold but declining from 18.22% in 2022 to 13.96% in 2023. The banking sector has been resilient, but non-performing loans remain a concern, potentially affecting the sector’s stability. Non-performing loans stood at 21.8% in 2024.
Social and Economic Challenges
Multidimensional poverty worsened slightly, from 46% in 2017 to 46.7% in 2022, due to the impacts of the COVID-19 pandemic. Youth unemployment remains high at 7.16%, particularly among youths ages 15–24, especially women. The disparities in employment opportunities and income distribution pose significant challenges for social cohesion and economic development.
Outlook and Recommendations
The medium-term growth outlook is positive, with GDP growth projected to rise to 3.4% in 2024 and 4.3% in 2025. Inflation is expected to remain outside the Bank of Ghana’s target range of 8±2%, at 20.9% in 2024 and 11.1% in 2025. To address these challenges, Ghana must enhance its competitiveness, ease infrastructure bottlenecks, and accelerate Agro-industrialisation. Investment in education and skills development is crucial to address youth unemployment and foster inclusive growth.
It has been recommended that promoting private sector development, strengthening the insolvency regime, improving access to finance, and enhancing the energy sector will strengthen Ghana’s economy. Supporting craftspersons will reduce the unemployment rate and help youth become financially independent.
In the longer term, structural reforms aimed at promoting private sector development and increasing the attractiveness of foreign direct investment (FDI) are necessary to raise the country’s growth potential. Critical reforms include strengthening the insolvency regime, improving access to finance, enhancing the energy sector, and improving the legal and regulatory environment faced by foreign direct investors.
Eliminating illegal mining activities that cause land degradation, environmental disruption, and water pollution will benefit the country’s economy. Though Ghana is trading in foreign markets, including African countries through the AfCFTA agreement, accelerating digitalisation and harnessing the opportunities offered by the Africa Continental Free Trade Agreement (AfCFTA) through integration with global value chains will also be crucial in enhancing the sustainable development of the country.
