Understanding Ghana’s rebased GDP

Ghana's recent GDP rebasing exercise, which changed the base year from 2006 to 2013, has revealed interesting insights into the West African country's economy. The new figures show that Ghana's GDP has expanded by 25 per cent to $52 billion dollars, making it the sixth largest economy in sub-Saharan Africa. This development has spurred discussions about the underlying factors driving Ghana's economic growth and the potential risks that lie ahead. John Ashbourne, an Africa Economist at Capital Economics, recently shared his analysis of the rebased GDP figures and the broader economic landscape in Ghana. According to Ashbourne, the more frequent rebasing exercises in Ghana provide a more accurate view of the country's economic performance compared to other African nations where such exercises are less common and often delayed. One key point highlighted by Ashbourne is that despite the slower growth rate revealed by the rebasing, Ghana's economy remains robust. For example, growth in 2017 was 8.1%, slightly lower than the previously reported 8.8%, but still a strong showing. This adjustment in figures offers a clearer picture of the existing economic trends rather than signaling a new reality. The significance of the extractive industry as a primary driver of growth was also emphasized, with the sector's share in the economy increasing slightly post-rebasing. Another crucial revelation from the rebasing exercise is the lower debt-to-GDP ratio in Ghana. Previously thought to be around 70%, the government's debt now stands at approximately 56% of GDP. This reduction in debt burden could bode well for Ghana's financial stability and fiscal management moving forward. In terms of diversification, Ghana is relatively well-positioned compared to its regional counterparts. The country boasts a diverse export base, including significant sectors like oil, gold, and cocoa. This diversified economic structure offers a level of resilience against commodity price fluctuations and market uncertainties, unlike countries like Nigeria, which are heavily reliant on a single export staple. While Ghana's economic outlook appears promising, there are notable downside risks that warrant attention. One pressing concern highlighted by Ashbourne is the government's limited revenue generation capacity, despite the increased GDP size. With tax collection remaining stagnant, there are challenges in funding essential investments, particularly in infrastructure projects. Additionally, the state-owned enterprises and the banking sector in Ghana are flagged as areas of vulnerability, with mounting debts posing risks to investors. Despite these potential pitfalls, Ghana's status as one of the fastest-growing economies in Africa continues to attract optimism and investment interest. The overall sentiment is positive, but vigilance is crucial to address the looming challenges and sustain the country's economic momentum.