UK-based rating agency Fitch has revised Ghana’s economic growth rate for this year from over 6% to 2% in 2020.
The Ghana government has, however, projected a Gross Domestic Product (GDP) growth rate of 1.5% at worst for this year because of the COVID-19 outbreak.
It, however, forecast a 6.8% GDP growth rate in the 2020 Budget.
In its analysis of the Ghanaian economy, Fitch said there is material downside risk to this forecast depending on the extent and duration of the coronavirus outbreak and the resulting lockdown measures.
“The current lockdown in Ghana’s two largest cities of Accra and Kumasi will lead to much slower growth in manufacturing and services, but agriculture and the extractive sectors are likely to fare better”, it said.
Since the commodity price collapse in 2015, Ghana’s economy has been powered by high growth in the oil sector, but modest growth in the non-oil sector.
“We expect a relatively robust recovery to 5% in 2021, as oil production recovers gradually from an expected fall in 2020 and non-oil growth continues its recovery. The possibility of bringing new oil and gas reserves into production brings some upside risk in the long term, but we expect that Ghana’s oil sector development will slow in response to the collapse of oil prices”, the rating agency disclosed.
The fall in oil export receipts, along with lower tourism receipts and remittances will lead to a widening of the current account in 2020.
However, Fitch said the widening will be contained by the fact that Ghana’s other key exports, gold and cocoa, are not correlated with the price of oil.
Fitch forecasts the current account deficit to widen to 4% of GDP, up from 2.9% in 2019.
The expected increase in external debt disbursements will support Ghana’s official international reserves position, as will the flexibility of the cedi. However, increased borrowing will take net external debt to 46.1% of GDP, well above the current ‘B’ median of 17.6%.
The World Bank had forecast a GDP growth rate of 6.8% in 2020 but recently revised it to 1.5%.
The International Monetary Fund also revised Ghana’s growth rate from 5.8% to 1.5% amid the coronavirus pandemic.