According to a recent Fitch monthly outlook, the country's economic growth this year would fall short of the government's forecast of 5.8%, due to rising inflation and budgetary tightening amid decreasing investor optimism.
Private spending and investment are predicted to suffer as a result of these challenges.
Ghana's real GDP growth would decrease to 4.4 percent in 2022 from 5.4 percent in 2021, according to the April 2022 Sub-Saharan Africa Monthly Outlook.
"While private consumption will remain the primary engine of GDP," the research adds, "households will face strong headwinds from rising inflation and fiscal consolidation measures, notably the recent adoption of a 1.5 percent tax on electronic payments."
The study goes on to say that lower business confidence means a somewhat lower estimate for gross fixed capital creation.
In March 2022, the Ghanaian purchasing managers' index (PMI) was 47.2, much below the neutral level of 50. Nonetheless, the S&P Global Ghana PMI increased from 48.3 in March 2022 to 48.3 in April 2022.
Following the Bank of Ghana (BoG) hike of its policy rate by 250 basis points in March 2022 and a possible further hike next week amid growing investor concerns, this signals an expectation that manufacturing output will decline and business conditions will deteriorate – fuelled by elevated inflation, depreciation of the cedi, and tightening monetary conditions.
Some market experts have already stated that the Monetary Policy Committee's (MPC) choices in May 2022 would be critical to the economic forecast, since the government has already begun aggressive budgetary tightening, which is a short-term downside risk to growth.
"With inflation proving uncontrollable at this stage, we anticipate the Bank of Ghana would prioritize its price stability mission and increase if needed... albeit with one eye on the growth pulse." In light of this, we lowered our growth prediction for 2022 to between 4.5 percent and 5.5 percent, with a midpoint of 5 percent," stated Courage Kingsley Martey, Senior Analyst at Databank, in an interview with the B&FT.
In an April 2022 study, Fitch predicted that rising inflation and fiscal austerity measures would impact on private spending, while decreases in oil and cocoa production would limit export growth.
"In fact, our prediction indicates that Ghanaian growth will stay below trend in 2022 — growth averaged 5.8% from 2015 to 2019."
"A 1.5 percent tax on electronic payments, including as mobile money transactions, bank transfers, and merchant payments, will further constrain consumer spending growth." In light of this, we expect private final consumption to rise at 4% in 2022, slightly lower than the five-year pre-pandemic average of 4.2 percent and adding 2.5 percentage points (pp) to headline GDP," according to the paper.
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