GHANA GB 06 - OECD.org

1 GhanaAccrakey figures Land area, thousands of km2239 Population, thousands (2005)22 113 GDP per capita, $ PPP valuation (2005) 2 248 Life expectancy (2000-2005) Illiteracy rate (2005)23 African Economic Outlook 2005-2006 tables and graphs in this section are available in Excel format at: Economic Outlook AfDB/OECD 2006283 THEGHANAIAN ECONOMY IS REAPINGthe benefitsof macroeconomic and structural reforms and nearlyfifteen years of political stability. Strong domesticrevenue mobilisation, prudent expendituremanagement, and debt relief granted under the HeavilyIndebted Poor Countries (HIPC) debt reductionprogramme, along with recent debt reduction promisesby the G8, have improved the government s fiscalposition.

2 At the same time, credible monetary policyhas eased inflationary expectations, brought downthe cost of borrowing and provided stability in theforeign exchange market. This improvingmacroeconomic stance has contributed to a recentupsurge in economic growth, with real GDP growthreaching an estimated per cent in 2005, up fromthe average annual rate of per cent realised during2000-04. Growth is projected to increase to per cent in 2007. Economic growth has been led by agriculture,notably three consecutive bumper cocoa crops resultingfrom both favourable weather and improving strong growth performance has enabled Ghanato accelerate implementation of its poverty reductionstrategy.

3 Moving forward, aggressive structural reforms,particularly in the financialsector have put the economyon course to stimulate domesticentrepreneurship and attractgreater foreign investment inthe coming , GHANA mustincrease its economic growthsubstantially if it is to generate adequate employmentgrowth, further reduce poverty and attain middle-income status over the next decade. To do so, Ghanamust improve its transport infrastructure, especiallythe road network. Currently, less than 50 per cent ofthe country s roads are in good condition, and therailway network is almost non-functional.

4 Theseinfrastructural deficiencies constitute a majorimpediment to private sector development and increasedforeign investment. Perceptions that corruption isincreasing also pose a threat to continued growth andrequire attention from the steady growth from prudent macroeconomic policies, structural reforms and strong agricultural performance needs to increase substantially to generate employment and further reduce (p)2006(p)2005(e)20042003200220012000199 91998199701234567 Real GDP Growth (%)Per Capita GDP ($ PPP)Figure 1- Real GDP Growth and Per Capita GDP($ PPP at current prices)Source:IMF and domestic authorities data.

5 Estimates (e) and projections (p) based on authors Economic Outlook AfDB/OECD 2006284 GhanaRecent Economic DevelopmentsGhana s economic growth record over the past twodecades has been among the strongest in Africa ataround per cent annually. Growth accelerated toabout per cent in 2000-03, rose further to percent in 2004 and to an estimated per cent in is expected to remain strong at about 6 per centin both 2006 and 2007. Recent growth has been driven largely by theagricultural sector, the largest sector of the economyaccounting for nearly half of total GDP and about60 per cent of total employment.

6 The sector grew per cent in 2004 and was estimated to have expandedby per cent in 2005. Favourable weather has beenthe main factor behind the rise in agricultural , higher producer prices and greater use offarm machinery and irrigation were also important. Rising cocoa production has underpinned thegrowth in agricultural output. Cocoa production roseby nearly 30 per cent in 2004 yielding a record cropof 736 911 tonnes in the 2003/04 crop season. Cocoaoutput decreased somewhat to 583 109 tonnes in the2004/05 crop season which nonetheless represented astrong performance by historical standards.

7 The strongcocoa output in 2004 and 2005 owed much to improvedcrop management and to the mass spraying of cocoafarms under the government s Cocoa and Pests ControlProgramme, which aims to control capsid pest andblack pod disease. The gradual increase in the domesticproducer price of cocoa, which is now nearly 70 percent of the world price, has also provided a majorincentive to the country s smallholder cocoa , due to declining world prices of cocoa since2003, even maintaining guaranteed payment levelswill be a and other crops, especially oil palm, cassava,sorghum and millet have benefitted from the Presidential Special Initiatives.

8 Which aims tomodernise Ghanaian agriculture through thedissemination of better farming practices, the provisionof irrigation facilities, and distribution of improvedvarieties of seeds and fertilisers. As part of the secondGhanaian Poverty Reduction Strategy (GPRS II), thegovernment plans to expand these initiatives in 2006through measures to enhance access to credit andagricultural inputs and by increasing availability ofextension services. Nonetheless, the agricultural sector faces majorstructural problems.

9 For example, it is estimated thatonly 5 per cent of irrigable land in GHANA is actuallyirrigated; and extension services are so limited thateach technical officer is responsible for helping nearly2 000 farmers. Moreover, 40 per cent of all agriculturaloutput is wasted annually due to inadequate storagefacilities, marketing chains and poor the industrial sector has continued toshow signs of recovery, industrial production is notgrowing rapidly enough to attain the government sobjective of an industrial sector that accounts for about37 per cent of GDP by 2010.

10 In order to achieve thisobjective, industry would have to grow at an annualrate of at least 12 per cent. In 2004, industrial outputgrew by per cent and accounted for per centof total GDP. This share was estimated to have risento per cent in 2005 following estimated growthof per cent. Manufacturing, the largest component of industrialoutput, has grown more slowly than the rest of theeconomy since 2002. In 2004, the manufacturing sub-sector s growth rate stood at per cent, almost thesame level as in the preceding two years.