Africa’s biggest bank, Standard Bank has revised this year’s projected economic growth rate target for Ghana from 6.2 % to 3.1%.
It has also slashed its 2023 Gross Domestic Product (GDP) forecast for the country to 4.1%, from the earlier 6.8%.
This forecast from the Standard Bank is lower than the government of Ghana’s revised growth rate for this year of 3.7%.
According to the bank’s ‘Africa Market Revealed’ report, the country’s growth now faces a confluence of downside risks in 2022 and 2023.
“Firstly, the government is running out of external financing options; therefore, public investment in infrastructure is unlikely to underpin growth over the coming year.”
The report added, “Secondly, the Ghana cedi’s plummet since January [2022] has further bumped up inflation, which would soften private household consumption over the coming year [2023]. Therefore, the BoG’s Monetary Policy Committee may have to further raise the key benchmark rate to stem rising inflation expectations as well as support the Ghana cedi.”
Standard Bank said the balance of payment deficit will widen to 4.1% of GDP in 2022, and then narrow to 2.6% in 2023.
“We now expect the C/A deficit to widen to 4.1% of GDP in 2022, then narrow to 2.6% in 2023. Still, financing a wider C/A deficit in 2022 would prove near impossible due to the lack of external funding”.
Furthermore, Standard Bank highlighted the positive impact an agreement with the IMF will have on the Ghana cedi. It however insists till that happens, the cedi will continue to weaken especially as global risk worsens further.
“We expect USD/GHS to rise to 8.29 by Dec. The GHS has been under immense pressure since Jan due to further foreign portfolio outflows. However, after the Mar rate hike, the pair stabilized around 7.50. Still, monetary policy can perhaps only do so much to stabilize the GHS; its selloff has been driven mainly by the concerns around fiscal policy,” the report stated.
The bank also expects the Monetary Policy Committee of the Bank of Ghana to hike its key policy rate by a further 100-150 bps in 2022 amidst the country’s inflationary pressures.
The International Monetary Fund has revised the growth rate of the global economy to 3.2% in 2022, 0.4 percentage points lower than in the April 2022 World Economic Outlook.
The Fund’s July 2022 Economic Outlook report attributed the slowdown in the growth rate to tightening global financial conditions associated with expectations of steeper interest rate hikes by major central banks to ease inflation pressure and spillovers from the war in Ukraine.