IMF Sees Ghana 2016 GDP Growth Slowest in Over Two Decades

Updated on
  • Defects at Jubilee oil field weigh on economic growth
  • Outlook remains uncertain, balance of risks tilted to downside

Ghana’s economic growth in 2016 will slow to the lowest rate in more than two decades as uncertainty over the resumption of oil and gas output at a key field weighs on the country’s prospects for next year, according to the International Monetary Fund.

West Africa’s largest economy after Nigeria will likely expand 3.3 percent this year, the slowest since 1990 according to IMF data, after growing 3.9 percent in 2015, the Washington-based lender said in a statement on its website on Tuesday. The country’s growth forecast for 2017 is 7.4 percent and 8.4 percent for the next year, the lender said.

The IMF issued its forecasts for Ghana after the country’s gross domestic product expanded at 2.5 percent in the three months through June as defects on the FPSO Kwame Nkrumah, the vessel used for production, storage and offloading crude at the Jubilee oil field, adversely affected oil and gas output. The government said in July that growth will accelerate to between 4.1 percent and 4.3 percent this year.

“The outlook remains difficult and the balance of risks is tilted to the downside,” the IMF said in its statement. “Uncertainty regarding repair operations at the Jubilee oil field pose a significant risk.”

Power Outages

Ghana turned to the IMF in April 2015 after lower prices for its gold, cocoa and oil exports caused debt to balloon and its currency to decline against the dollar. Regular power cuts have also weighed on the economy.

“The recent re-emergence of power shortages due to disruption in gas supply is adding to downside risks,” the IMF said.

The fund revised Ghana’s budget-deficit forecast for 2016 to 5.2 percent of GDP from 4.8 percent in May, due to oil-revenue shortfalls. Inflation will slow to 13.5 percent by the end of the year, from 16.9 percent in August, Joel Toujas-Bernate, the IMF’s mission head in Ghana, told reporters on a video conference call from Washington on Tuesday. 

Consumer-price growth will slow to within the Bank of Ghana’s target of 6 percent to 10 percent in the second half of 2017, the IMF said.

Interest Rates

The “central bank’s monetary policy committee rate should come down from next year as inflation eases,” Toujas-Bernate said. The bank held rates at 26 percent at its last MPC meeting on Sept. 19. The cedi gained 0.6 percent to 3.9550 per dollar by 07:48 a.m. in the capital, Accra, on Wednesday.

The country’s ratio of debt-to-GDP will remain below 68 percent in 2016, from 72 percent in 2015, Toujas-Bernate said. A continued decline “will go a long way to restore investor confidence and enhance public finance,” Toujas-Bernate said.

(A previous version of this story was correct to show the IMF’s correct inflation forecast in seventh paragraph.)

(Updates with cedi in penultimate paragraph.)
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