Ghana Business Forecast Report Q3 2009

Publication Date	June 2009
Publisher	Business Monitor
Product Type	Report
Pages	52
ISBN Number	1757-0778
Product Code	BMI03956

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Summary

Our outlook on Ghana has improved since our last quarterly Ghana Business Forecast Report.

Although we have lowered our 2009 growth forecast to 4.2% from 4.7% previously, the risks of macroeconomic instability have declined substantially. Previously, we were very concerned over the twin deficits on the current account and fiscal account, and speculated that financial support from multilateral bodies would be needed to cover the shortfalls. Our worries have largely been mitigated following news that the nation will receive US$1.2bn and US$1.0bn in concessional finance from the World Bank and the IMF respectively. Ghana is not out of the woods yet, though.

The global recession will take its toll on the domestic economy, presenting policy challenges to the new administration.

The authorities have shown signs that they recognise the seriousness of the ongoing global recession and the need to cushion the domestic population from the potentially damaging effects on living standards amid slowing growth. At the same time, though, the bloated budget deficit is still very much on the agenda. The pressure to cut expenditure is strong, yet difficult to reconcile with the need to maintain social spending in these troubled times. Looking beyond this conundrum, the government faces a formidable challenge in the form of oil revenues; Ghana will wish to avoid the so-called 'resource curse' when it begins to export oil in late 2010.

On the economic front, we expect growth to slow sharply from the 7.3% rate recorded for 2008.

Our forecast is below consensus, with the IMF and the African Development Bank expecting growth of 4.5% and 5.8%, respectively, in 2009. While relatively robust export earnings and private investment should make Ghana a regional (and, indeed, global) outperformer amid the worldwide recession, private consumption growth is expected to weaken, dragged down by declining remittances.

Looking beyond 2009, we see a marked improvement in macroeconomic fundamentals following the onset of domestic oil production, and forecast real GDP growth entering double digits by 2011.

Foreign investors continue to be attracted to Ghana thanks to the nation's strong political stability and improving business environment. Power supply should receive a notable boost from the completion of the West Africa Gas Pipeline, which is scheduled for January 2010. Meanwhile, the nascent oil sector is enjoying particular interest, with Kosmos Energy expecting to raise up to US$3bn by selling its stakes in two concessions offshore Ghana, which contain the Jubilee field.

Ghana is not, however, immune to the global trend of divestment; in May, London-listed Mwana Africa announced its intention to sell its entire 70% interest in the Konongo gold exploration asset.

Content

Executive Summary
- Dealing With The Global Crisis
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Policy Challenges Amid The Global Recession
- The government recognises the need to mitigate the impact of the global recession on Ghana, but it has little room for manoeuvre given the poor state of the fiscal finances
- Regional Politics
- The Resurgence Of Political Risk In SSA
- We believe that the global economic crisis and its adverse effects on sub-Saharan African (SSA) economies will lead to a resurgence of political risk in the region, posing in some countries a threat to stability, and negatively impacting investor confidence
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Regional Outperformer, With Growth At 4.2%
- We are forecasting growth of 4.2% for Ghana in 2009. Economic activity should continue to expand, thanks to the relatively favourable trading of cocoa and gold, as well as ongoing investment in the fledgling hydrocarbons sector
- Balance Of Payments
- Current Account: From Deficit To Surplus
- Ghana's current account is poised to benefit from a major boost in the form of domestic oil exports, which should begin in late 2010 and gain traction in 2011
- Monetary Policy
- Rates On Hold, But Cuts To Follow
- We see scope for 150bps of interest rate cuts to 17.00% over the remainder of 2009, following the latest 'hold' from the Bank of Ghana
- Fiscal Policy
- Fiscal Finances: Slow Progress Ahead
- We are encouraged by the Ghanaian authorities' intention to clamp down on fiscal spending, and expect a shrinking of the budget deficit
Chapter 3: 10-Year Forecast
- The Ghananian Economy To 2018
- Oil To Boost Growth Over 2009-2018
- We are sanguine on Ghana's growth prospects for 2009-2018, forecasting annual real GDP growth of an average 8.3% over the coming 10 years
Chapter 4: Special Report
- The Outlook For Global Banking
- Business Environment Rating Outlook
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Infrastructure
- Market Orientation
- Operational Risk
Chapter 6: BMI Global Assumptions
- Global Assumptions
List of Tables
- Table: Ghana Political Overview
- Table: ECONOMIC ACTIVITY
- Table: BALANCE OF PAYMENTS
- Table: MONETARY POLICY
- Table: FISCAL POLICY
- Table: LONG-TERM MACROECONOMIC FORECASTS
- Table: LOAN-TO-DEPOSIT RATIOS, Selected States
- Table: LOAN GROWTH (% CHG Y-O-Y), Selected States
- Table: COMMERCIAL BANKING BUSINESS ENVIRONMENT RATINGS, SELECTED STATES
- Table: BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Table: BMI LEGAL FRAMEWORK RATINGS
- Table: LABOUR FORCE QUALITY
- Table: MIDDLE EAST & AFRICA ANNUAL FDI INFLOWS
- Table: BMI TRADE RATINGS
- Table: TOP EXPORT DESTINATIONS
- Table: GLOBAL ASSUMPTIONS
- Table: GLOBAL & REGIONAL REAL GDP GROWTH
- Table: EMERGING MARKETS
- Table: COMMODITIES