Ghana’s economic growth dropped to a 37-year low of 0.4% in 2020 from 6.5% in 2019 as the coronavirus pandemic adversely affected economic activity. The pandemic affected domestic economic activity and consumption as well as international trade. However, the government’s strong investment in agriculture, which grew by 7.4% in 2020, via its flagship programs such as Planting for Food and Jobs helped to cushion the economy against the pandemic. This was further supported by a 1.5% growth in the services sector, which benefited from the lifting of the lockdown that allowed free movement of consumers and labour as well as domestic supply chain.

Nevertheless, while we were always expecting the Ghanaian economy to be among few oil producing economies to survive the pandemic, growth has come in below our expectations. We were expecting GDP growth to come in just below 1% versus the provisional outturn of 0.4%. We attribute the situation to the fact that the authorities may have underestimated the severity of the contractions experienced in Q2-2020 and Q3-2020. The Ghana statistical service has revised the GDP contraction in Q2-2020 from -3.2% to -5.9% and that of Q3-2020 from -1.1% to -3.2%.

Fortunately, there is light at the end of the tunnel. We believe that a sharp recovery of about 3.3% experienced in the final quarter of 2020 shows that the economy is positioned to recover strongly in 2021. We expect increased domestic consumption, implementation of government policies to alleviate the impact of the pandemic on businesses, better international trade and strong private sector activity to drive GDP growth higher to around 4.5% in 2021.

However, there are risks to our expectations of a strong recovery in 2021. They include unfavourable volatility in global commodity prices (cocoa, gold, crude oil) and debt sustainability concerns. Moreover, while Ghana’s current improved covid-19 situation bodes well for economic activity in 2021, there is evidence that economic activity would be significantly affected if the country experiences another wave of infections.