The Ghanaian economy contracted for the second consecutive quarter by 1.1% in Q3-2020 on the back of contractions in the industrial and services sectors. This follows a contraction of the economy by 3.2% in the previous quarter. While the contraction is not as severe as the previous quarter, the recession experienced by the Ghanaian economy is contrary to earlier indications that economic activity has started to recover to the extent that it could lead to a recovery of GDP growth in Q3-2020.

The industrial and services sectors that collectively account for 77% of the Ghanaian economy contracted by 5.1% and 1.1% respectively in Q3-2020. However, the overall impact on GDP growth was partly cushioned by the agricultural sector, which accounts for 23% of the economy. The agricultural sector grew by 8.3% in Q3-2020.

The GDP contraction may be quite surprising to followers the Ghanaian economy, especially given that the central bank’s Composite Index of Economic Activity (CIEA), which measures economic activity in the country, showed that the economy recovered in Q3-2020.  The CIEA grew by grew by 10.5% in Q3-2020, up from a growth of 4.2% in a similar period last year. It is likely that the recovery experienced in Q3-2020 was not yet enough to make up for the contractions experienced for three consecutive months earlier in the year (March, April, May) on the back of the coronavirus pandemic.

We expect the economy to recover in the final quarter of the year to lessen the pressure on the authorities to engineer growth in 2021. However, the overall GDP growth for the year is likely to be around 1% rather than the ambitious estimates released by the authorities earlier in the year.