Business in Ghana

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More Bonds Needed

Posted by Business in Ghana on November 14, 2010

Ghana’s economy is 75 percent bigger than previously calculated, the country’s Statistical Service said, slashing the relative size of the fiscal deficit and the current-account shortfall.

The West African nation’s gross domestic product this year is 44.8 billion cedis ($31.2 billion), compared with the previous estimate of 25.6 billion cedis, Grace Bediako, head of the Accra-based agency, told reporters today.

“The revisions will be a huge positive for the relative risk matrix” of Ghana, Stephen Bailey-Smith, an analyst at Standard Bank Plc in London, said in a note to clients. The changes “should foster a rating upgrade.”

Standard & Poor’s cut Ghana’s credit rating to B, five steps below investment grade, on Aug. 27, citing concern about the large fiscal deficit and a lack of clarity on oil-industry laws. The government posted shortfalls equivalent to 14.5 percent of GDP in 2008 and 9.7 percent in 2009. The International Monetary Fund said on Oct. 1 that the shortfall may exceed the 8 percent target this year. Those figures are now significantly smaller.

The statistics service also raised its growth forecast for this year to 6.6 percent from 5.9 percent, and revised up its calculations for the previous three years. GDP expanded 4.7 percent in 2009, 8.4 percent in 2008 and 6.5 percent in 2007, compared with previous estimates of 4.1 percent, 7.2 percent and 5.7 percent.

Economic growth slowed in 2009 after the government embarked on an austerity program to bring down the budget deficit. Ghana posted a current account deficit of about 7.9 percent of GDP last year, according to the previous data.


Ghana’s 8.5 percent fixed-rate Eurobond due October 2017 was bid for as much as $115.50 at 5:14 p.m. in London, with a yield of 5.746 percent, according to data compiled by Standard Bank London. The bid price is 0.5 percent higher than yesterday’s close of $114.87, while the yield is 10 basis points lower.

Today’s announcement “confirms that over the last five years Ghana has performed better than most of its peers,” Wayne Mitchell, the country representative for the IMF, said in an interview today.

The revision won’t affect IMF support for the country, since “assistance is determined by need and not economy size,” Mitchell said.

Deputy Finance and Economic Planning Minister, Seth Terkper, said on Oct. 20 that Ghana may lose access to cheap loans if the new data show the country is wealthier than thought.

New Activities

The size of the economy was revised up after new economic activities were added, methodology was improved and the base year was shifted to 2006 from 1993, Bediako said.

“The new data series includes activities of the oil sector, forest plantations and information and communication, which were not included in previous estimates,” she said.

The new GDP places Ghana among middle-income countries, as defined as those with a per capita income of more than $976 a year, Bediako said. Ghana’s is now $1,318.36.

The statistics aren’t all good news, said Sampson Akligoh, an analyst at Accra-based Databank Financial Services.

“If GDP is 44 billion cedis and tax revenue is less than 7 billion cedis, it tells you tax collection is not enough,” he said in an interview today.

Ghana’s economic growth may average about 8 percent in the next three to five years, as oil production starts from the West African nation’s Jubilee oil field December, Kofi Wampah, deputy central bank governor said Oct. 7.

Wampah said the economy may expand 10 percent to 15 percent next year, slower than Finance Ministry’s prediction of 20 percent.

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