The International Monetary Fund (IMF) has revised down Ghana’s 2023 growth forecast to 1.6%, from its earlier projection of 2.8% in its April 2023 World Economic Outlook (WEO) Report.
This comes after the World Bank had also cut the country’s growth rate forecast for this year to below 2%. The IMF cited fiscal slippages resulting from high debt and budget deficit, reducing government spending on infrastructure and investments, as the major reasons for the revision.
While emerging market and developing economies are expected to have stronger growth prospects than advanced economies, the report highlights varying prospects across regions. On average, growth is expected to be 3.9% in 2023 and to rise to 4.2% in 2024. The forecast for 2023 is modestly lower by 0.1 percentage point than in the January 2023 WEO Update, and significantly below the 4.7% forecast of January 2022.
In low-income developing countries, Gross Domestic Product (GDP) is expected to grow by 5.1%, on average, over 2023–24, but projected per capita income growth averages only 2.8% during 2023–24, below the average for middle-income economies (3.2%) and so below the path needed for standards of living to converge with those in middle-income economies.
The report paints a challenging outlook for the global economy, saying that a return to pre-pandemic pace of economic growth is increasingly elusive. It notes that more than a year after Russia’s invasion of Ukraine and the outbreak of more contagious COVID-19 variants, many economies are still absorbing the shocks. The recent tightening in global financial conditions is also hampering the recovery.
Moreover, many economies are likely to experience slower growth in incomes in 2023, amid rising joblessness. Even with central banks having driven up interest rates to reduce inflation, the road back to price stability could be long. Over the medium term, the prospects for growth now seem dimmer than in decades.
The report highlights significant downside risks to the outlook, stating that much uncertainty clouds the short- and medium-term outlook as the global economy adjusts to the shocks of 2020–22 and the recent financial sector turmoil. Recession concerns have gained prominence, while worries about stubbornly high inflation persist. There is a significant risk that the recent banking system turbulence will result in a sharper and more persistent tightening of global financial conditions than anticipated in the baseline and plausible alternative scenarios, which would further deteriorate business and consumer confidence.
However, the IMF does predict a 2.9% expansion of Ghana’s economy in 2024, which could indicate a more positive outlook for the country’s economic growth in the medium term. Nonetheless, the country will need to address the fiscal slippages and high debt that have impacted its growth prospects, in order to fully realize its potential for economic expansion.