Ghana:

An Economic Overview
Project Report – Group 8

Business Economics – NL Dalmia Institute of

Management Studies and Research

Submission by –
Pragati Tripathi (PF2123-A041)
Shimoni Jain (PF2123-A053)
Neha Gupta (PH2123-A135)
Bilal Vaid (PF2123-A131)
Pratik Chaudhary (PH2123-A152)
Sahil Phatak (PF2123-A186)

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 Table of Contents
Introduction...................................................................................................................3
Fiscal Policy.................................................................................................................. 4
Medium-Term Macroeconomic Framework..............................................................4
Medium-Term Fiscal Targets....................................................................................5
Conclusion and Recommendations............................................................................5
GDP.............................................................................................................................. 5
Ghana Economic Growth...........................................................................................7
National Income............................................................................................................7
Inflation....................................................................................................................... 12
Consumer Price Index (CPI)....................................................................................13
Factors Affecting Inflation.......................................................................................14
GDP....................................................................................................................14
Borrowing Expenses...........................................................................................14
Types of Inflation....................................................................................................15
Cost Push Inflation..............................................................................................15
Demand Pull Inflation.........................................................................................15
Trade and Investments................................................................................................16
Trade:....................................................................................................................... 16
Investment:..............................................................................................................17
Oil Price Slump.......................................................................................................18
Foreign Exchange.......................................................................................................19
Economic Indices........................................................................................................22
Rule of Law.............................................................................................................23
Government Size.....................................................................................................23
Regulatory Efficiency..............................................................................................23
Open Markets..........................................................................................................23
Bibliography...............................................................................................................25

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 Introduction

Ghana sits on the Atlantic Ocean and borders Togo, Cote d'Ivoire, and Burkina Faso.
Its population is of about 29.6 million. In the past two decades, it has taken major
strides toward democracy under a multi-party system, with its independent judiciary
winning public trust. Ghana consistently ranks in the top three countries in Africa for
freedom of speech and press freedom.

Ghana’s rapid growth was halted by the COVID-19 pandemic, the March 2020
lockdown, and a sharp decline in commodity exports. The economy had grown at an
average of 7 percent in 2017-19, before experiencing a sharp contraction in the second
and third quarters of 2020.

The economic slowdown had a considerable impact on households. The poverty rate
is estimated to have slightly increased from 25 percent in 2020 to 25.5 percent in
2020.
The overall fiscal deficit doubled to 15.2 percent in 2020. Public debt increased to
81.1 percent of GDP in 2020, placing Ghana at a significant risk of debt distress.
Growth firmed up further in first and second quarters 2021 despite a sharp contraction
in mining and the pandemic’s second wave. 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 percent of GDP.

Ghana’s economy is projected to recover gradually over the medium term, thanks to
commodity price growth and strong domestic demand. Ghana received $1 billion
equivalent in the recent IMF SDRs allocation, part of which will go to support
economic recovery. Growth is expected to average 5.1 percent yearly in 2021-23.
After declining by 1.7 percent in 2020, real per capita GDP is projected to return to its
pre-COVID-19 level in 2021. The fiscal deficit is expected to remain high as the
government implements its economic support program. It is projected to narrow to 14
percent of GDP in 2021 and 9.5 percent by 2023 - still above Ghana’s 5 percent
ceiling.

Fiscal Policy

Provisional fiscal data for end-year 2018 point to further consolidation of

Government’s public finances relative to the same period in 2017. The fiscal deficit

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(on cash basis) amounted to GH¢11,672.7 million or 3.9 percent of GDP, down from
an end-year fiscal deficit position of GH¢12,244.7 million (4.8% of GDP) in 2017.

Provisional 2019 Q1 fiscal data indicate that fiscal operations for the period resulted
in an overall fiscal deficit of GH¢6,359.6 million or 1.8 percent of GDP. The outturn
represents a 30.0 percent increase over the programmed deficit target of GH¢4,891.9
million or 1.4 percent of GDP, which reflects pressures mainly from payments of
unbudgeted expenditures, including energy sector Independent Power Producers’
(IPPs) bills. These expenditure pressures have the potential of widening the fiscal
deficit if business continues as usual and corrective measures are not immediately
applied to arrest the situation. The energy sector issues are likely to have a devastating
effect on the economy if corrective measures are not taken now.

Recommended revenue and expenditure measures have been incorporated in the

revised fiscal framework to keep the deficit at no more than 4.5 percent of GDP for
2019.

Medium-Term Macroeconomic Framework

Overall real GDP is expected to grow by 5.1 percent in 2022, with the non-oil GDP
expected to grow by 4.0 percent. Over the medium term, real GDP is expected to
record an average growth of 6.3 percent, with projected rates of 6.6 percent in 2023,
5.2 percent in 2024, 6.6 percent in 2025, and 6.9 percent in 2026. The medium-term
growth trajectory is underpinned by continued growth in oil and gas production and
the impact of Government’s flagship programmes such as the Planting for Food and
Jobs Programme and the 1-District 1-Factory Programme.

Monetary Policy over the medium-term will remain relatively tight. This will continue
to provide the necessary anchor for inflation expectations and steer inflation towards
the medium-term target band of 8±2 percent.

The external current account balance is expected to improve gradually. This will be
reflected in the current account deficit declining to within sustainable levels of not
exceeding 4.0 per cent of GDP, and consistent with a Foreign Reserves Import of
Goods and Services cover of at least 3.5 months.

Medium-Term Fiscal Targets

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Fiscal policy over the medium-term will remain anchored on the fiscal deficit and the
primary balance targets. Although the Fiscal Responsibility Act (FRA) allows for a
fiscal deficit of up to 5 percent of GDP and requires the primary balance to be in
surplus, the medium-term fiscal stance should equally remain supportive of debt
sustainability.

A combination of revenue-enhancing and expenditure-containment and reduction

measures are applied to arrive at a policy scenario for 2022 that is consistent with the
3 requirements of the FRA. Under this policy scenario, the fiscal deficit target for
2022 is 4.5 percent of GDP but projected to tail off to under 4.0 percent of GDP over
the medium-term. At these rates, the primary balance will also remain positive to
support the reduction in the rate of debt accumulation over the period.

GDP

The economy of Ghana has a diverse and rich resource base, including

the manufacturing and exportation of digital technology goods, automotive and ship
construction and exportation, and the exportation of diverse and rich resources such as
hydrocarbons and industrial minerals. These have given Ghana one of the
highest GDP per capita in West Africa. Owing to a GDP re-basement, in 2011 Ghana
became the fastest-growing economy in the world.

Ghana was among the top ten fastest-growing economies globally in 2019, with
growth ranging from 6.3 percent to 7.1 percent. Ghana’s economy continues to rise in
2019, with first-quarter GDP growth projected at 6.7 percent, up from 5.4 percent in
the same period last year. Many economic changes and programs were launched to
combat macroeconomic instability, with inflation at the forefront,

On the other hand, Ghana joined the HIPC (Heavily indebted poor countries) initiative
in the early 2000s to bring the country’s foreign debt ratios down to a manageable
level. Ghana left HIPC in 2004 after making significant progress in meeting most of
the requirements for attaining the floating completion point. More specifically, Ghana
joined the IMF-supported Extended Credit Facility (ECF) program in 2015 to restore

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macroeconomic stability by August 30, 2017. Still, the program was extended until
April 2, 2019, following the IMF’s last two evaluations of the ECF program.

More specifically, the Ministry of Finance announced a fresh rebase with a base year
change to account for various industries that had not been adequately accounted for
since the last rebase, resulting in a 25% increase in nominal GDP in 2017. In 2017, the
Bank of Ghana (BoG) introduced an inflation-targeting regime under the Bank of
Ghana Act, 2002 (Act 612) to maintain exchange rate stability while achieving a
single-digit inflation rate.
Ghana Economic Growth

Firming household and capital spending should bolster GDP growth in 2021, while
the gradual easing of restrictions abroad bodes well for the external sector. In 2022,
the economy is set to grow at a slower pace amid a subsiding base effect and
normalizing activity. Meanwhile, lower oil production next year and uncertainty
regarding the pandemic weigh on the outlook. Focus Economics panellists project the
economy to expand 5.3% in 2022, which is up 0.2 percentage points from last month’s
forecast, and 4.9% in 2023.

Ghana’s economic growth slowed in the first quarter to 4.9% year-on-year versus
6.7% in the same period last year, official data showed on Wednesday, partly due to a
sharp fall in construction as the country fought to contain the coronavirus.

Ghana has had one of Sub-Saharan Africa’s fastest-growing economies in the past few
years, but country has cut its 2020 growth forecasts after measures to contain the virus
stifled business activity.

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 National Income

Gross National Income (GNI) is the total amount of money earned by a nation's
people and businesses. It is used to measure and track a nation's wealth from year to
year. The number includes the nation's gross domestic product (GDP) plus the income
it receives from overseas sources.

The economy of Ghana has a diverse and rich resource base, including

the manufacturing and exportation of digital technology goods, automotive and ship
construction and exportation, and the exportation of diverse and rich resources such as
hydrocarbons and industrial minerals. These have given Ghana one of the
highest GDP per capita in West Africa. Owing to a GDP rebasement, in 2011 Ghana
became the fastest-growing economy in the world.

The economy is a mixture of private and public enterprise. About three-fifths of

the GDP is derived from the services sector, agriculture contributes almost one-fifth,
and industry about one-fourth.

Ghana is Africa's largest gold producer, after overtaking South Africa in 2019 and
second-largest cocoa producer (after Ivory Coast). It is also rich in diamonds,
manganese ore, bauxite, and oil. Most of its debt was cancelled in 2005, but
government spending was later allowed to balloon. Coupled with a plunge in oil
prices, this led to an economic crisis that forced the government to negotiate a $920
million extended credit facility from the International Monetary Fund (IMF) in April
2015.

Sources of National Income in The Country

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Agriculture, forestry, and fishing: Apart from providing the bulk of national income,
agriculture, forestry, and fishing employ more than half of the population.

Agriculture: Cacao—grown commercially for its seeds, cocoa beans—is cultivated on

more than one-half of Ghana’s arable land and is a significant source of the country’s
export revenue. Consequently, the world price paid for cocoa beans directly
determines Ghana’s economic fortunes.  By the late 1990s the farmers’ share of world
market price was increased from 25 percent to 60 percent; the additional money
directed to farmers stimulated production. Ghana is usually among the world’s leading
producers of cocoa and is known for the high-grade quality of its sun-dried (rather
than mechanically dried) cocoa.

Forestry: Timber has also been an important source of foreign exchange earnings.
Toward the end of the 20th century, however, the significance of timber exports
dropped because of restrictions on cutting and exporting round logs. The government
rations logging licenses. The Ghanaian domestic market is important. The value of
food produced for local consumption is considerable. The soil and climate favour a
wide range of crops. Yams and cereals such as rice and millet are produced primarily
in the northern savanna zone; cattle are also raised there. The forests yield shea nuts
and kola nuts. Successive governments have strongly supported diversification of food
production to reduce reliance on a few crops and to cut the need for imported
foodstuffs, but their measures have often been contradictory because of the emphasis
on exports capable of earning foreign exchange. Besides cocoa beans and timber,
other agricultural products that are exported include sugar, coffee, palm oil, palm
kernels, copra, and various fruits and vegetables.

Fisheries: Ghana’s offshore waters are rich in fish, and the creation of Lake
Volta added another important source of fish for the domestic market. The various
types of fish caught include cape hake, grunt, sea bream, tilapia, herring, mackerel,
barracuda, and tuna. Most of the catch is sun-dried or smoked and consumed locally,
but an increasing proportion is refrigerated; certain fishes, especially tuna, are mainly
directed toward the overseas market, and exports of canned and fresh tuna increased in
the late 20th century.
Resources and power.

Resources

Although Ghana has a wide range of minerals, only some—gold, diamonds,

manganese, and bauxite (the principal ore of aluminium)—are exploited. Gold

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mining, with an unbroken history dating from the 15th century, is the oldest of these
extraction industries. There are also reserves of limestone and iron ore. Salt, in which
the country is self-sufficient with a surplus for export, is obtained from the sea and
lagoons. There are also extensive supplies of building stone, gravel, and sand. Ghana
has oil and natural gas reserves. The state-owned Ghana National Petroleum
Corporation (GNPC) is involved in all aspects of the oil and gas industry in the
country. In 1970 oil was discovered offshore between Salt pond and Cape Coast.

Power

Some three-fifths of Ghana’s electricity is supplied by oil- or gas-fired plants, such as

those at Kpone, Tema, and Takoradi. Many of Ghana’s rivers have the requisite
regimes and rates of flow to permit exploitation for hydroelectric power, which
provides about two-fifths of the country’s electricity and is supplied principally by
the Akosombo Dam on the Volta River. A second dam is located a few miles
downstream at Kpong, and another dam, the Bui, is located on the Black Volta River.
Drought conditions, however, can negatively impact hydroelectricity production and
cause power interruptions.

Manufacturing

The Ghanaian government’s various industrialization policies, initiated since

independence, have resulted in the establishment of a wide range of manufacturing
industries, notably the production of food, beverages, tobacco, textiles, clothes,
footwear, timber and wood products, chemicals and pharmaceuticals, and metals,
including steel and steel products. These are manufactured mostly for
local consumption.

Finance and other services

Ghana is home to many financial institutions, including commercial, development,

and foreign banks. The Bank of Ghana is the central bank and issues the national
currency, the Ghana cedi. The Ghana Stock Exchange is located in Accra. Revenue
from tourism became a major source of foreign exchange earnings for Ghana in the
late 20th century, more than tripling in the 1990s in response to the rehabilitation of
historic monuments and the development of ecotourism at Kakum National
Park. They are two of about 30 surviving stone forts unique to the coast of Ghana,
originally built to serve as commercial and administrative headquarters for Europeans
involved in the early gold trade and later transatlantic slave trade. The private hotel

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industry has expanded in response to new tourists and a free market economy, and
tourist hotels can now be found in almost all major Ghanaian cities.

Trade

Ghana’s principal exports—cocoa, gold, and sawn wood—are received primarily by

the countries of the European Union, India, and the United Arab Emirates. Ghana’s
principal imports include petroleum, equipment, and food products, originating
primarily from China, the United Kingdom, and the United States.

Labour and taxation

Value-added tax is a consumption tax administered in Ghana. The tax regime which

started in 1998 had a single rate but since September 2007 entered into a multiple rate
regime. In 1998, the rate of tax was 10% and amended in 2000 to 12.5%. The top
income tax and corporate tax rates are 25%. Other taxes included with value-added tax
(VAT), are national health insurance levy, and a capital gains tax. The overall tax
burden was 12.1% of Ghana's total domestic income in 2013. Ghana's national budget
was the equivalent of 39.8% of GDP in 2013. Ghana is implementing the rent tax in
2021.

Impact of Covid

Ghana is home to approximately 30 million people. Africa as a whole is expected to

see a GDP reduction from an expected 3.2% to 1.8% as a result of COVID-19; Ghana
takes a sharper dive from an expected 6.2% to 2.8%. With a market-based
economy primarily powered by international trading and imports, disruptions to global
commerce and supply chains significantly impact Ghana’s economy. Reduced trade
and reserves ripple over to reductions in government revenues and increased
unemployment even as the country incurs the increased expenditure and debt-burdens
costs of the pandemic. Ghana’s economy’s open nature has made it particularly
vulnerable to global economic volatilities.

Internally, agriculture is a crucial sector that provides about 90% of Ghana’s food

needs. It is also labour-intensive. Production and distribution have been impacted by
the reduced workforce during lockdown conditions and restricted movement, while
consumers spent more on healthcare than food. Collectively, these various factors
have caused significant downturns in this economic sector. Manufacturing represents
another primary sector impacted adversely given its dependence on imports of raw
materials, a sharply disrupted supply chain as noted earlier. Economic impacts in the

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service sector such as tourism, hotels, restaurants, telecommunications and education
have also been steep given the internal and external travel restrictions and physical
distancing requirements.  The COVID-19 crisis impacts those at the poverty line the
worst. Half of Ghana’s regions have poverty rates higher than the national average.
The economic downturn of 2020 embeds poverty more deeply into areas already
mired in penury. Along with countries in sub-Saharan Africa, Ghana is one of the
world’s most impoverished areas, struggling even before the COVID-19 crisis to meet
SDG goals. The pandemic has pushed the country back in its goals of eliminating
poverty by as much as seven years.

Ghana GNI per capita for 2020 was $2,230, a 0.9% increase from 2019.
Ghana GNI per capita for 2019 was $2,210, a 4.25% increase from 2018.
Ghana GNI per capita for 2018 was $2,120, a 13.37% increase from 2017.
Ghana GNI per capita for 2017 was $1,870, a 4.47% increase from 2016.

Inflation

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 Ghana's Inflation rate
14
12.37
12
10 9.84 9.89 9.28
8
6
7.14
4
2
0
2017 2018 2019 2020 2021

Inflation rates

The annual inflation rate in Ghana accelerated for the fifth straight month to 11% in
October of 2021, from 10.6% in September. That was the highest inflation rate since
July of 2020, exceeding the Bank of Ghana's target band of 6% to 10% for the second
straight month. Prices accelerated for non-food products (11% vs 9.9% in September),
namely housing & utilities and transport, while food inflation slowed somewhat (11%
vs 11.5%). On a monthly basis, consumer prices went up 0.6 percent, the same pace as
in the previous month.

Consumer Price Index (CPI)

The Consumer Price Index (CPI) is a measure that examines the weighted average of
prices of a basket of consumer goods and services, such as transportation, food, and
medical care. It is calculated by taking price changes for each item in the
predetermined basket of goods and averaging them. Changes in the CPI are used to
assess price changes associated with the cost of living.

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 CPI GHANA

133.3
131.65

132.5
131.3
Column2

129.19
127.57
126.58
124.7
123.6
122.7
121.52
120.05

120.4

0 0 0 1 1 1 1 1 1 1 1 1 1
-2 v-
2 -2 -2 -2 -2 r-
2 -2 -2 l-
2 -2 -2 -2
ct o ec n b ar p ay n
Ju ug p ct
O N D Ja Fe M A M Ju A Se O

We can see that the CPI is rising continuously since the pandemic struck.
If the average price of all goods and services in the CPI were to go up 3% over the
previous year's level, for example, then inflation would be pegged at 3%. This also
means that the purchasing power of the Ghanaian Cedi Vs Dollar will also decline by
3%.

Factors Affecting Inflation

GDP

Gross domestic product (GDP), or the total value of all finished products and services
generated in a given period, is used to quantify economic growth. The proportion of
growth or loss is adjusted for inflation when compared to the prior year. As a result, if
GHANA’S GDP increased by 18.18% and inflation increased by 11.11%, GDP would
be reported at 7.07% rise.

With each increase in the price of basic goods and services, the value of the dollar
falls as its purchasing power erodes.

Borrowing Expenses

In theory, low or no inflation can aid an economy's recovery from a recession or

depression. With low inflation and interest rates, borrowing money for investments or
the purchase of large-ticket products like autos or arranging a mortgage on a house or
apartment is also affordable.

When interest rates on loans are low, banks and other lending institutions may be
hesitant to lend money to consumers, reducing profit margins.

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According to some economists, controlled inflation of no more than 6% and possibly a
little less could be advantageous to economic recovery, but inflation of 10% or more
would be detrimental. But as Ghana is an underdeveloped nation it is somewhat okay
to have a high inflation rate that may be crossing 10%, but policy makers have to be
sure of not turning it in a hyperinflation.

Types of Inflation
Cost Push Inflation

Cost-push inflation occurs when the cost of labor and raw materials rises, causing
overall prices to rise (inflation). Higher manufacturing costs might reduce the
economy's aggregate supply (the total amount of output). Because demand for goods
has remained unchanged, production price increases are passed on to consumers,
resulting in cost-push inflation. Unexpected causes of cost-push inflation are often
natural disasters, which can include floods, earthquakes, fires, or tornadoes and in
this case was a global COVID -19 pandemic.

Ghana’s entire economy is based on the import and export of crude petroleum ($2.66
B), gold ($2.39 B), Cocoa beans ($2.27 B). During pandemic globally production as
well as demand and supply were down. So, Ghana which is a major producer of crude
petroleum had so much surplus of oil left in its reserves as the demand was disrupted
globally. So, the crude prices went to -10$/ barrel i.e. they were giving money to sell
their crude. As soon as economy started reviving in July 2020 the OPEC committee
decided to restrict supply of crude to other countries which led to rise in crude oil
prices. As demand was reviving but supply was restricted which led rise to rise in
prices. This is a classic example of cost push inflation.

Demand Pull Inflation

Demand-pull and cost-push inflation move in practically the same way but they work on
different aspects of the system. Demand-pull inflation demonstrates the causes of
price increases.

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Demand-pull inflation is caused by five factors:

1. Growing Economy: Consumer confidence rises as the economy grows, causing

them to spend more and take on more debt. As a result, demand continues to
rise, resulting in increasing prices.
2. Increasing export demand: A sudden increase in exports drives the currencies
involved to undervalue.
3. Government spending: Prices rise when the government spends more freely.
4. Expected inflation: Companies may raise their prices in anticipation of rising
inflation in the near future.
5. Increasing the amount of money in the system: When the money supply
expands but there aren't enough products to go around, prices rise.

Recently we have seen crude prices risen from 50$/ barrel in Jan 2021 to 86$/barrel in
Oct 2021 that is the highest in the decade. As OPEC and other oil producing
companies had tighter restrictions on oil supply and demand for oil suddenly spiked
up due to various reasons such as china power crisis, Semi-conductor issue, etc. as the
demand was extrapolating the prices soared high. This is known as the demand-pull
Inflation. Even in case of Cocoa beans there was a major drought situation in some of
the African countries. This also led to Inflated prices as there was a high demand and
Production crisis.

Trade and Investments

Trade:

Ghana is well integrated into the global marketplace. Exports of goods and services
from 33.6% of GDP while imports of goods and services constitute 34.7% of GDP.
Thus, in total international trade amounts to 68.3% of Ghana's GDP. What this means
is that the country is heavily dependent on international trade. China, which is the
epicentre of the pandemic, presents a direct pathway through which Ghana has been
impacted on the trade angle. In terms of partner share in export trade, China is Ghana's
largest import and second largest export trade partner.

Ghana's top 5 export trade partners are India (US$3.8 billion), China (US$2.0 billion),
South Africa (US$1.7 billion), Switzerland (US$1.6 billion), and Netherlands (US$1.2
billion). The top 5 import origins are China (US$3.3 billion), United States (US$1.0
billion), Belgium (US$0.7 billion), India (US$0.7 billion), and the United Kingdom
(US$0.6 billion). From this data, China's trade with Ghana stands at a whopping

15
US$5.3 billion which is about 8% of Ghana's GDP. There was a reduction in trade
volumes between the two countries following the lockdowns, and this translated into
welfare losses in both countries.

A mitigating factor could be for traders in Ghana to find alternative trading partners to
replace China, but this would be very difficult in the short term; and if even
successful, this could lead to some upward price effects, given that imports from
China are often thought to be cheaper.

Globally, as countries tend to look inwards, export trade would decline while local
manufacturing of domestically consumed goods received a minor boost, provided
funds, raw materials and intermediate goods are available. Whichever way you look at
it, the China trade channel would present a strong avenue through which the Ghanaian
economy felt the economic effects of COVID-19. The strength of this China trade
channel was wholly depended on how long China remains in lockdown, the links
between China and other countries and the actions of these parties, the ease with
which traders find alternative partners, and how long the spread of the pandemic lasts
globally. China was not be the only source of worry of the trade effects of COVID-19.
Unfortunately, all of Ghana's top S trading partners (both import and export fronts)
have been affected by COVID-19, though disproportionately. Among the top trade
partners, excluding China, Switzerland was the worst affected. The United States of
America, the United Kingdom, the Netherlands, and Belgium are also hit hard by the
pandemic. India and South Africa have fewer reported cases; nonetheless, the
numbers in these countries are nontrivial. Thus, the lockdowns and other trade
restricting measures taken by these other trade partners weighted heavily on the
Ghanaian economy.

Investment:

The potential impact of COVID-19 on investment in Ghana was enormous. These

effects would arise from anticipated drops in Foreign Direct Investment (FDI) and
portfolio investment, capital flight, a squeeze in the domestic financial system and
fewer funding avenues from foreign sources. Already, the United Nations Conference
on Trade and Development (UNCTAD) has estimated that global FDI could decline
by 5% to 15% as a consequence of the Coronavirus outbreak. The fear of FDI slump
is further amplified by the fact that already, the top 5,000 Multinational Companies
(MCs) have on average revised their earnings estimates downwards by 9%.
Developing countries MNCs would be the worst affected, with profit now projected to
fall by 16%. a decline in earnings by MNCs would mean a reduction in FDI since
profit reinvestments form a significant portion of FDI.

16
Interestingly, most of Ghana's top trading partners are also her main sources of FDI.
In 2018, China (37 project) was the foremost source of FDI in terms of number of
projects followed by India (18 projects), the Netherlands (15 projects) and the United
Kingdom (12 projects) respectively. In terms of dollar value, the Netherlands was the
leading source country bringing in a total of US$1.89 billion in FDI. This was
followed by India with a total FDI value of US$510.72 million. Since these countries
have been directly hit by the outbreak, we expect more decline in FDI from these
countries to Ghana. This could lead to Ghana receiving less than the US$2.8 net FDI it
had in 2019. Assuming that the negative pressure on FDI is 5% to 15% as projected
by UNCTAD, then Ghana may receive between US$2.4 billion USD $2.7 billion
which is less than what it received (US$1.89 billion) in 2019.

The apprehension that comes with the outbreak and associated lockdowns would
further lead to an increase in risk globally which would in turn lead to reductions in
international remittances and portfolio investments to developing economies including
Ghana. In 2019, Ghana received US$2.6 billion in net portfolio investments. Over the
lifespan of the outbreak, portfolio investments to emerging economies would decline
and there are likely to be capital reversals as investors in advanced economies seek
liquidity to enable them cope with economic downturns in their countries. Therefore,
the Ghanaian economy is likely to suffer some reductions in portfolio inflows.
Remittances, which form up to 3.6% of GDP is also expected to be sluggish; though
this may be counterbalanced by the countercyclical nature of remittance inflows.

Oil Price Slump

Sluggish oil demand and worsening price war between Russia and Saudi Arabia have
resulted in oil prices slumping to an 18-year low. West Texas Intermediate (WTI)
crude prices dipped by as much as 26% on Wednesday March 18, 2020, to settle at US
$20.06 per barrel. With Ghana now being a net exporter of oil, revenue losses are
envisaged. An average crude oil price per barrel of US$58 was envisaged in the 2020
budget, but with crude oil prices now hitting record lows, the revenue shortfalls could
be enormous, and could lead to Ghana missing oil revenue targets. This would require
a revision of oil revenue targets and finding innovative ways to plug the financing
loophole. Ghana is among the top 10 fuel exporting countries in Africa with fuel
exports averaging US$3.1 billion from 2016 to 2018. UNCTAD estimates that Africa
would lose approximately US$65 billion in fuel exports to the Coronavirus outbreak.
This would impact heavily on countries that are heavily dependent on fuel exports. At
the moment, fuel exports comprise 23.3% of Ghana's total exports. This means,
should the outbreak prolong, the impact on export revenues would be immerse.

17
 Foreign Exchange

Ghana's Top Exports:

 36% ($6.19 billion): 7108 - Gold (including gold plated with platinum)

unwrought or in semi-manufactured forms, or in powder form.
 31% ($5.25 billion): 2709 - Petroleum oils and oils obtained from bituminous
minerals, crude.
 11% ($1.85 billion): 1801 - Cocoa beans, whole or broken, raw or roasted.
 2.44% ($409 million): 1803 - Cocoa paste, whether or not defatted.
 2.08% ($349 million): 2602 - Manganese ores and concentrates, including
ferruginous manganese ores and concentrates with a manganese content of 20
% or more, calculated on the dry weight.
 2.01% ($337 million): 1804 - Cocoa butter, fat and oil.
 1.46% ($246 million): 0801 - Coconuts, Brazil nuts and cashew nuts, fresh or
dried, whether or not shelled or peeled.
 0.872% ($146 million): 1604 - Prepared or preserved fish; caviar and caviar
substitutes prepared from fish eggs.
 0.722% ($121 million): 2843 - Colloidal precious metals; inorganic or organic
compounds of precious metals, whether or not chemically defined; amalgams
of precious metals.
 0.648% ($108 million): 1511 - Palm oil and its fractions, whether or not
refined, but not chemically modified.

What did Ghana import in?

 8.44% ($881 million): 8703 - Motor cars and other motor vehicles principally

designed for the transport of persons (other than those of heading 87.02),
including station wagons and racing cars.
 4.23% ($441 million): 8704 - Motor vehicles for the transport of goods.
 3.59% ($374 million): 1006 - Rice.
 3.06% ($319 million): 2523 - Portland cement, aluminous cement, slag cement,
super sulphate cement and similar hydraulic cements, whether or not coloured
or in the form of clinkers.
 2.26% ($236 million): 2710 - Petroleum oils and oils obtained from bituminous
minerals, other than crude; preparations not elsewhere specified or included,
containing by weight 70 % or more of petroleum oils or of oils obtained from

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 bituminous minerals, these oils being the basic constituents of the preparations;
waste oils.
 2.08% ($217 million): 4406 - Railway or tramway sleepers (cross-ties) of
wood.
 1.94% ($203 million): 3004 - Medicaments (excluding goods of heading 30.02,
30.05 or 30.06) consisting of mixed or unmixed products for therapeutic or
prophylactic uses, put up in measured doses (including those in the form of
transdermal administration systems) or in forms or packings for retail sale.
 1.93% ($202 million): 0303 - Fish, frozen, excluding fish fillets and other fish
meat of heading 03.04.
 1.57% ($164 million): 3901 - Polymers of ethylene, in primary forms.
 1.47% ($154 million): 3808 - Insecticides, rodenticides, fungicides, herbicides,
anti-sprouting products and plant-growth regulators, disinfectants and similar
products, put up in forms or packings for retail sale or as preparations or
articles (for example, sulphur-treated bands, wicks and candles, and fly-
papers).

Ghana’s Top 10 Imports

Ghana’s Top 10 Import Partners

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Ghana Export Data

Ghana is a country in West Africa, along the Gulf of Guinea and the Atlantic Ocean.
Ghana has a diverse economy with rich resource base, including ship construction,
digital technology goods and manufacturing. The country also has the exportation of
diverse and rich resources such as industrial materials and hydrocarbons.

Based on Ghana export data analysis, Ghana’s exports totalled USD 16.7 billion in
2020, declined marginal from 2020’s USD 17.0 billion. Ghana export statistics show
Ghana stood at 76th exporter country in the world during 2020.

Given Ghana’s population of 28.1 million people, the value of total goods exported in
2020 translated to roughly USD 600 for every resident in the West African country.
As per Ghana trade data, Ghana’s major export partners are China, Switzerland, India,
South Africa and Netherlands.

Ghana’s Top 10 Exports

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Ghana’s Top 10 Export Partners

Economic Indices

Ghana’s economic freedom score is 59.2, making its economy the 101st freest in the
2021 Index. Its overall score has decreased by 0.2 point, primarily because of a
decline in judicial effectiveness. Ghana is ranked 11th among 47 countries in the Sub-
Saharan Africa region, and its overall score is above the regional average but below
the world average.

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The Ghanaian economy remains in the mostly unfree category for the fifth year in a
row. For Ghana to return to an upward trajectory toward greater economic freedom,
the government would have to strengthen fiscal health and prioritize further
improvements in the three rule-of-law indicators: property rights, judicial
effectiveness, and government integrity.

Rule of Law

Property rights are recognized and enforced, but the process for getting clear title to
land is often difficult, complicated, and lengthy. Scarce resources compromise and
delay the judicial process, and poorly paid judges can be tempted by bribes and are
vulnerable to political pressure. Notwithstanding a robust anticorruption legal
framework, enforcement remains a major challenge. Corruption is pervasive in
government institutions.

Government Size

The top individual income tax rate has been cut to 30 percent, and the top corporate
tax rate is 25 percent. Other taxes include value-added and capital gains taxes. The
overall tax burden equals 14.1 percent of total domestic income. Government
spending has amounted to 20.2 percent of total output (GDP) over the past three years,
and budget deficits have averaged 6.1 percent of GDP. Public debt is equivalent to
63.2 percent of GDP.

Regulatory Efficiency

The review process for getting electricity has been streamlined, and equipment needed
for new electricity connections is now more readily available. Labour force
participation and value added per worker have increased. The state-owned Electricity
Company of Ghana (ECG) provides subsidies. The partial privatization of ECG was
reversed by the government in late 2019.

Open Markets

Ghana has three preferential trade agreements in force. The trade-weighted average
tariff rate is 11.3 percent, and five nontariff measures are in effect. Ghana is more
open to foreign investment and ownership than some other sub-Saharan African
countries are, but investment in some sectors is restricted. The financial system has
undergone restructuring, and the supervisory framework is relatively strong. Bank
credit to the private sector has increased.

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 Bibliography

 https://www.mofep.gov.gh/sites/default/files/reports/economic/2020-Fiscal-
Strategy-Document.pdf
 https://www.heritage.org/index/country/ghana#rule-of-law
 https://www.researchgate.net/publication/346233399_The_Impact_and_Opport
unities_of_COVID-19_in_Ghana
 https://www.investopedia.com/terms/g/gross-national-income-gni.asp
 https://fred.stlouisfed.org/series/MKTGNIGHA646NWDB
 https://www.britannica.com/place/Ghana/Economy
 https://www.borgenmagazine.com/impacts-of-covid-19-in-ghana/
 https://theodora.com/wfbcurrent/ghana/ghana_economy.html

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