Country Report Ghana June 2009

Outlook for 2009-10

• The new president, John Atta Mills, and his ruling National Democratic Congress (NDC) will spend the next few months consolidating power and re-establishing themselves after being out of power since 2001.
• The global recession and heightened risk aversion will compound the challenges facing Ghana's new policymakers as the economy slows amid much weaker commodity prices and tighter global financing conditions.
• Real GDP growth is forecast to ease to 4.7% in 2009 on the back of weaker credit growth and reduced government spending, before recovering modestly to 5.4% in 2010, supported by investments in the oil sector.
• The stronger dollar, large current-account deficit and low foreign-exchange reserves will cause the cedi to continue to depreciate in 2009-10.
• The effects of expansionary government spending in 2008 are expected to cause inflation to remain high, at an average of 16.8% in 2009, before tighter fiscal and monetary policy help to lower it to an average of 11% in 2010.
• Falling imports and healthy export growth are expected to narrow the current-account deficit to 14.9% of GDP in 2009 and to 11.5% of GDP in 2010.

Monthly review

• Tribal tensions have increased in the Northern province of Ghana, as rival clans in the Dagbon region have clashed over who should be allowed access to a sacred mausoleum.
• The tribal dispute took on a political angle when the opposition leader, Nana Akufo-Addo, accused the NDC government of inciting violence in the region through its alleged favouritism of a particular clan.
• There have been more calls from civil society for the prosecution of officials from the previous administration who are accused of corruption. However, corruption proceedings risk turning into a witch hunt.
• Government officials have met with the IMF to discuss the prospect of Ghana receiving financial assistance from the Fund. The IMF has restarted potentially unpopular reforms such as cost recovery pricing of utilities.
• Inflation has continued to accelerate in recent months. A major factor is the continuing depreciation of the cedi against the currencies of Ghanas major trading partners.
• An official probe has begun into divestiture of Ghana Telecom by the previous government because of worries that deal was not value for money.
• The trade account has improved owing to strong exports, as gold and cocoa prices have remained strong.