Ghana records weakest post-pandemic growth in Q3

Ghana's economic landscape is facing challenges as the country records its weakest post-pandemic growth in the third quarter, with GDP growth slowing to 2 per cent. The slowdown has been attributed to on-going fiscal consolidation efforts and a tightened monetary policy stance to address elevated inflationary pressures. Kweku Arkoh-Koomson, an Economic Analyst at Databank, discussed the economic performance and the dynamics at play in a recent CNBC Africa interview. The third quarter GDP numbers reflect the slowest growth since the pandemic era, with the industrial sector being the biggest drag on the economy. The industrial sector has been in recession for the past four quarters due to constraints in access to credit, fiscal policy reforms, and limited policy intervention. However, the growth in the economy has been buoyed by robust performance in the agriculture and services sectors. The agriculture sector, driven by crops, has shown resilience despite challenges in the cocoa sub-sector. The services sector, especially the information technology sub-sector, has exhibited strong growth. One of the key developments in the agriculture sector is the recent $800 million loan secured by the government, which is expected to support the sector during the upcoming cocoa season. However, challenges such as reduced Kweku production due to disease outbreaks and global price fluctuations pose uncertainties for the sector's performance. The government's fiscal consolidation efforts and monetary policy decisions have played a significant role in addressing inflationary pressures. The central bank's zero financing policy for the government's deficits and aggressive tightening of monetary policy have helped curb inflation. The recent hikes in the policy rate and cash reserve ratio have contributed to reducing liquidity in the market and stabilizing inflation. Looking ahead, revitalizing the industrial sector remains a priority for Ghana's economic recovery. The government has outlined plans to support agri-businesses and promote value advancement in key sectors like bauxite and aluminum. However, challenges persist in accessing credit, following banking sector reforms, and debt exchanges. Collaborative efforts between the government and development banks are needed to establish credit lines and boost investments in the industrial sector. Despite improvements in the external sector, Ghana's economy remains vulnerable to external shocks due to low reserve levels and financing needs. The IMF deal has bolstered investor confidence in the government's fiscal discipline, but more efforts are needed to enhance resilience and insulate the economy from external vulnerabilities. As Ghana navigates the path to economic recovery, building a more resilient economy will require sustained efforts to strengthen key sectors, address credit constraints, and mitigate external risks. The government, central bank, and private sector must collaborate to foster sustainable growth and stability in the face of ongoing challenges.