Growth slows in Q3 2023 amid fiscal consolidation

Provisional economic growth averaged two percent in the third quarter of 2023, down from 2.7 percent in the same period last year, according to latest figures published by the Ghana Statistical Services (GSS).

The slower growth was attributed primarily to ongoing fiscal consolidation efforts and a tightened monetary policy stance adopted to address elevated inflationary pressures in the economy.

Despite the growth deceleration, Ghana remains on track to exceed the government’s projected GDP target of 1.5 percent for 2023.

According to the GSS report, Ghana’s provisional non-oil real GDP also eased to 2.7 percent year-on-year in Q3 2023, compared to 3.3 percent in Q3 2022.

Market analysts expressed the view that with the nation embarking on frontloaded fiscal adjustments, the private sector was expected to become the primary catalyst for economic growth this year. However, tighter credit due to banks’ risk-averse stance in light of uncertainties from the domestic debt exchange programme has constrained private sector activity.

In effect, while the economy still experienced some growth earlier half of the year, the full impact of the IMF-supported austerity programme and potential monetary tightening could dampen real sector activity in quarters ahead.

The GSS figures show Ghana’s real quarterly GDP, including the oil and gas sector, reached GH¢44.74billion in Q3 2023, up from GH¢43.87billion in Q3 2022.

Non-oil real GDP also rose to approximately GH¢41.91billion in Q3 2023, from GH¢41.06billion in Q3 2022.

On a sectoral basis, agriculture exhibited robust 5.9 percent growth year-on-year, followed by the services sector which expanded 5.5 percent. The industry sector contracted 4.3 percent over the same period.

Services remained the dominant contributor to GDP at basic prices, providing 42.1 percent of total value added, while industry and agriculture contributed 33 percent and 24.9 percent, respectively.

The sharp contraction in industry, which accounts for a third of domestic production, gives cause for concern. Coupled with the tight financing environment that could hamper private sector-led growth, subdued industrial activity does not bode well for job creation and poverty reduction objectives.

The Ghanaian economy has faced turbulence in recent months, as the country contends with surging public debt, inflation and weakened currency.

The government is implementing a raft of revenue reforms, expenditure cuts and other austerity measures under a US$3billion Extended Credit Facility programme with the International Monetary Fund to restore macroeconomic stability.

Analysts say the impact of fiscal consolidation, coupled with potential monetary tightening, poses significant downside risks for short-term growth prospects.

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