The African Development Bank Group (AfDB) has released its African Economic Outlook report, projecting a challenging economic landscape for Ghana over the next couple of years. According to the report, Ghana's Gross Domestic Product (GDP) is expected to experience a slowdown, with growth rates anticipated at 4.5% in 2025 and slightly better at 4.8% in 2026. The anticipated deceleration is attributed to several factors including waning activity in the mining sector, diminishing momentum in fiscal consolidation efforts, and persistent high-interest rates.
Inflation, however, is forecasted to decline, with the AfDB estimating figures of 15.5% for 2025 and a more stable 9% by 2026. This easing trend in inflation should be bolstered by tighter monetary policies, a reduction in currency depreciation, and lower food prices.
Fiscal health appears to be on the mend as well, with projections suggesting a narrowing of the fiscal deficit to 3.5% of GDP in 2025, further improving to 3% in 2026. This positive trend is attributed to ongoing fiscal consolidation initiatives alongside public financial management reforms. These include the formulation of a more robust fiscal responsibility framework and the establishment of new rules aimed at tightening expenditure commitments.
The report also highlights improvements in Ghana's public debt situation. The debt-to-GDP ratio is expected to decrease to 66.4% by 2025. This forecast is underscored by ongoing restructuring efforts with commercial creditors, as well as an uptick in revenue owing to better tax compliance and reduced tax expenditures.
Moreover, the current account balance is forecasted to reflect positively, projected at 2.6% of GDP in 2025 and 1.4% in 2026. This improvement is largely attributed to increased exports of oil and gold, which are vital components of Ghana's economy.
However, the AfDB has cautioned that the outlook is not without its risks. Factors such as climate change, potential policy reversals, and the direct and indirect impacts of increased tariffs in the United States could pose significant challenges to Ghana’s economic landscape. The report emphasizes that adhering to the fiscal consolidation path is crucial for mitigating these risks and ensuring economic stability.
The report also touches on the considerable wealth currently held by Ghana, estimated at $845 billion as of 2020. This figure reflects a remarkable increase of 69% from 2010. The nation's wealth comprises various components: produced capital (or manufactured capital), financial capital totaling $88 million, human capital valued at $475 billion, and natural capital worth $306 billion. However, it also bears a negative net foreign asset position of -$25 billion, indicating that Ghana is a net debtor.
Natural capital includes both renewable and nonrenewable resources, estimated to contribute approximately $267 billion and $39 billion, respectively. The AfDB report suggests that Ghana has significant potential to enhance its wealth through the mobilization of both domestic and external savings.
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In the short term, achieving macroeconomic stability is essential. Efforts will need to focus on enforcing existing laws and regulations while improving the business environment. For the medium to long term, the report advises expediting economic transformation and appropriately valuing and accounting for natural capital and its associated ecosystems.
Recognizing the importance of fiscal discipline, Ghana has embarked on a fiscal consolidation program, aiming to properly account for its natural capital by developing a National Plan for Natural Capital Accounting. Current initiatives focus on compiling pilot natural capital accounts and integrating these into the System of National Accounts. Such integrations could enhance Ghana's wealth profile, improve creditworthiness, and unlock sustainable financing resources through domestic resource mobilization.
With these reforms and a commitment to maintaining fiscal stability, Ghana aims to navigate its economic challenges while laying the groundwork for future growth and development.
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