THUR 23 SEPT, 2021-theGBJournal- Renaissance Capital (RenCap), a leading emerging and frontier markets investment bank, has revised down its 2021 growth forecast for Ghana to 3.6%, from 4.3% previously, due to weaker 2Q21 growth.
RenCap said in its ‘’Ghana: 2Q21 GDP’’ report, which analysed the performance of the country’s extractive and Non-extractive economy, that they doubt that growth in 3Q21 and/or 4Q21 will top the 3.9% of 2Q21, as growth bottomed in 2Q20.
‘’The upside risk may be a brisker recovery from the mining sector than we are currently projecting. We expect the non-extractive economy’s recovery to be sustained in 2H21, however at a slower pace as the low-base effect wears off. The vaccination rollout will also help to keep the economy relatively open, particularly when COVID-19 cases recur, which is supportive of the recovery,’’ RenCap said.
Ghana is currently experiencing its third wave but has come off the peak of almost 2,000 cases on 2 August.
Ghana’s YoY growth of 3.9% in 2Q21 (vs -5.9% a year earlier) masks an otherwise solid bounce in the non-extractive economy, which grew by 8.2% (vs -4.8%). This was driven by the trade, manufacturing, and hotels & restaurants sectors.
The non-extractive economy, which accounts for 85% of GDP, grew by 8.2% YoY in 2Q21, vs a 4.8% YoY decline in 2Q20. Its recovery was led by the trade, manufacturing, and hotels & restaurants sectors, which were propelled off low bases brought on by a three-week lockdown in April 2020.
Trade – RenCap’s proxy for consumption – grew by 11% YoY in 2Q21, vs an 18% YoY decline a year earlier. Manufacturing grew by 8% YoY, compared to a 12% YoY decline. Hotels & restaurants expanded by 19% YoY.
‘’However, this was small compared to its massive 75% decline in 2Q20, RenCap noted.
The high-contact hospitality factor was hit very hard in 2020 by the imposition of a lockdown and its associated travel restrictions. This was amplified by the high base set in 2019 of the government’s Year of the Return initiative, linked to the 400th anniversary of slaves landing in the US, which drew the African diaspora. The fastest-growing sector in 2Q21 was the cocoa sector, which grew by a sharp 27% YoY, vs 2% YoY in 2Q20. This corresponds with a 27% YoY increase in cocoa export revenue to $720mn in 2Q21, which is positive for the external sector.
The decline in the extractive economy (includes the mining and oil sectors) for a sixth consecutive quarter, by 19% YoY, detracted from the recovery having shaved 2.4 ppts off GDP growth.
The mining sector saw a deeper decline; it contracted by one-third in 2Q21 (vs a 14% YoY decline in 2Q20), which corresponded with a 25% YoY fall in gold export revenue to $1.3bn in 2Q21. This may be due to a continuation of the supply-chain disruptions experienced in 2020, which contributed to a 12% decrease in gold production to 4.02mn oz in that year. The oil sector declined by 5% YoY in 2Q21, vs a 9% YoY decline in 2Q20.
Renaissance Capital’s Frontier oil & gas analyst, Nikolas Stefanou, attributes the protracted decline to the current wells being in decline. The biggest oil field, Jubilee, has not had a new well drilled since 2019. Nikolas projects a 14% fall in oil output to 157kbpd in 2021, with the TEN field seeing the biggest fall of one-third to 33kbpd.
Twitter-@theGBJournal|Facebook-The Government and Business Journal|email: govandbusinessj@gmail.com
