Data shows broad economic recovery
By Elvis DARKO, Accra
Data released by the Ghana Statistical Service (GSS) and the Bank of Ghana (BoG) affirm that the economy is on a growth trajectory, signaling sustained recovery.
The size of the economy, or Gross Domestic Product, grew from GH¢614.33 billion in 2022 to GH¢841.63 billion in 2023.
After recording GH¢6.6 billion losses in 2022, the banking industry also reported an astounding 224.6% growth in profit, reflecting a robust recovery.
This is a significant turnaround from the losses incurred in 2022 due to the Domestic Debt Exchange Programme (DDEP), GH¢8.3 billion in 2023.
The achievement of a positive trade balance in 2023 is celebrated as a milestone and a testament to the country’s economic resilience.
2.9% GDP growth
According to GSS data, the economy recorded a 2.9% GDP growth in 2023, surpassing the Finance Ministry’s revised forecast of 1.5%.
This is the fastest pace in more than a year after the industry sector exited four straight quarters of contraction and recorded 1.6% growth in the last quarter of 2023.
GDP registered 3.8% growth in the three months through December from a year earlier, compared with a revised 2.2% in the prior quarter.
That is the fastest pace of growth since the second quarter of 2022.
The last quarter of 2023 saw a higher growth rate of 3.8%, driven primarily by the oil and gas subsector.
This marks the first time in over a year that Ghana experienced a higher growth rate in oil GDP.
This growth rate is slightly slower than the 3.1% recorded in 2022.
While the industry sector remains the largest in the economy, it contracted by 1.2% of GDP in 2023 compared to a 0.6% contraction in 2022.
The decline was primarily attributed to the 10.9% and 9.9% contractions in the Electricity and Construction subsectors, respectively.
Mining and Quarrying was the only subsector within the industry that recorded growth, at 2.5%.
Meanwhile, the Agriculture sector grew at a rate of 4.0% in 2023, slightly lower than the 4.5% growth seen in 2022.
With the exception of Forestry and Logging, which contracted by 5%, all subsectors within Agriculture expanded.
The Livestock subsector recorded the highest growth rate within Agriculture, at 4.9%.
In the Services sector, growth stood at 5.5% in 2023, with all 12 subsectors expanding.
Information and Communication recorded the highest growth rate at 18%, while Trade, Repair of Vehicles, Household Goods had the lowest growth rate at 0.3%.
Over the past decade, four subsectors (Crops; Trade, Repair of Vehicles, and Household Goods; Mining and Quarrying; and Manufacturing) have consistently accounted for over 50.0% of Ghana’s GDP.
This trend has been increasing, with the last two years seeing a share of more than 60%.
According to GSS, the last quarter of 2023, recorded the highest real GDP growth rate (3.8%) across the four quarters with the Industry sector reversing a consistent contraction in the first three quarters to an expansion of 1.6% in the 2023 quarter 4.
Breakdown of GH¢841.63bn GDP
Net indirect taxes estimated at GH¢58.74 billion.
The services sector constituted the biggest contributor, accounting for GH¢357.34 billion. This represented 45.6% contribution to GDP.
Industry followed with GH¢247.941 billion, about 31.7% contribution to GDP.
Agriculture is estimated at GH¢177.606. billion (22.7% contribution to GDP).
The top five Sub-Sectors by Share of GDP were Crops (19.4%), Trade; Repair of Vehicles, Household Goods (18.3%), Mining and Quarrying (12.9%), Manufacturing (12.1%), Transport and Storage (6.0%).
Gross National Income per capita
The report added that Gross National Income per capita from a local currency perspective has more than doubled since 2018, from GH¢9,813 to GH¢25,349.
However, from a US dollar viewpoint, the report said the income per head has remained about the same in the last six years, ranging from a highest $2,453 to a lowest of $2,126.
Banks record GH¢8.3 billion profit in 2023
Banks also made a remarkable turnaround recording an astounding 224.6% growth in profit.
After GH¢6.6 billion losses in 2022 due to DDEP, banks posted GH¢8.3 billion profit in 2023.
However, the latest report indicates a notable reversal of fortunes, attributed largely to the positive growth in key income lines of banks.
Key contributors to this impressive profit surge include a 41.5% growth in net interest income in 2023, significantly higher than the 18.7% growth seen in 2022.
Additionally, fees and commissions experienced a growth of 22.7% in 2023, although slightly lower than the 25.2% growth recorded in the previous year.
The Bank of Ghana (BoG) noted that the surge in net interest income in December 2023 was driven by increased interest income on loans and investments, thanks to elevated lending rates and interest rates on money market instruments.
Furthermore, a reduction in interest expenses, stemming from decreased borrowings throughout the year, further bolstered net interest income growth.
Moreover, profitability indicators for the banking sector saw a remarkable improvement, with Return on Assets (ROA) climbing to 5.4% in December 2023 from a negative -3.8% in December 2022. Similarly, Return on Equity (ROE) surged to 34.2% from a negative -25.5% over the same period.
The report also highlighted a significant decrease in impairments on financial assets in 2023, which played a pivotal role in the sector’s improved profit performance.
Total provisions and impairments contracted by 79.2% in December 2023, following a substantial increase in December 2022 primarily due to impairments on restructured bonds.
While operating expenses witnessed a higher growth rate of 34.9% in December 2023 compared to 27.2% in December 2022, driven by increased other operating expenses and staff costs, the overall outlook for the banking sector remains positive.
BoG expects the sector to maintain stability, supported by a rise in assets fueled by increased liquidity flows from deposits and a buildup in shareholders’ funds from the profits accrued by banks in 2023.
Additionally, with the implementation of recapitalization plans throughout the year, the sector is projected to sustain its positive trajectory.
In a related development, the Financial Soundness Indicators (FSI) of banks in Ghana have displayed largely positive trends, reflecting improvements in liquidity, efficiency, and profitability during the review period.
According to the January 2024 Monetary Policy Report released by the Bank of Ghana, the industry’s liquidity position remained robust, supported by increases in core and broad liquidity measures.
The ratio of core liquid assets, primarily cash and due from banks, to total deposits rose from 38.4% in 2022 to 39.3% in 2023.
Similarly, the ratio of core liquid assets to total assets increased from 29.0% to 30.7% over the same period, partly due to an upward revision in the cash reserve ratio during the year.
Moreover, the banking industry’s solvency position, measured by the Capital Adequacy Ratio (CAR) adjusted for regulatory reliefs, stood at 13.9% in December 2023.
Although this figure is higher than the revised prudential minimum of 10%, it represents a decline from the 16.2% ratio recorded in December 2022.
The decrease in CAR between the two periods reflects the recognition of a quarter of impairments on restructured bonds in 2023, as part of measures to mitigate the impact of DDEP.
However, despite these positive indicators, asset quality risks remained elevated in December 2023, stemming from the lingering effects of the macroeconomic challenges experienced in 2022.
The non-performing loans (NPL) ratio increased to 20.7% in December 2023, up from 16.6% in December 2022. Similarly, the NPL ratio adjusted for the fully provisioned loan loss category rose from 6.6% to 8.4% during the same period.
The NPL stock expanded by 37.4% to GH¢15.8 billion in December 2023, compared to a growth of 40.5% recorded in December 2022.
Nevertheless, growth in gross loans and advances moderated to 13.8% from 25.9% over the same comparative period.
Overall, while the banking sector in Ghana has shown positive signs of improvement in various financial indicators, challenges related to asset quality persist, underscoring the need for continued vigilance and proactive measures to ensure stability and resilience in the sector.
Total exports hit $16.6 billion at end-2023
Data also revealed encouraging trends in economic landscape, particularly in trade, with substantial growth in exports and positive impacts on international reserves.
Trade figures
As of December 2023, Ghana’s export earnings surged to $16.6 billion, surpassing the estimated expenditure of $14 billion on imports during the same period.
This marks a notable increase from the previous month’s export and import figures of $14.9 billion and $12.8 billion, respectively.
On a year-on-year basis, total exports witnessed a slight decrease from the $17.4 billion recorded in the corresponding period the previous year.
Contribution of Commodities
Key contributors to the robust export performance include gold and cocoa, contributing $7.6 billion and $2.1 billion, respectively.
Additionally, oil exports accounted for $3.8 billion, with other exports contributing the remaining $3 billion.
Import Composition
Breaking down imports, oil and non-oil imports played significant roles, accounting for $4.4 billion and $9.5 billion, respectively, of the total import value.
Impact on Reserves
The positive trade balance has contributed to an increase in Ghana’s gross international reserves, reaching $5.9 billion by the end of December 2023 from $4.9 billion at the end of September 2023.
This growth, in turn, led to a marginal increase in the country’s import cover, rising from 2.3 months in September to 2.4 months in October.
Net International Reserves
Ghana’s net international reserves have experienced a marginal increase, standing at $3.1 billion as at December 2023 compared to the $2 billion recorded in September 2023.
Economic Significance
The positive trade balance, accounting for 3.4% of GDP, represents a noteworthy improvement from the 2.7% recorded in November 2023.
This data highlights the economic significance of Ghana’s trade performance and its positive impact on the nation’s financial resilience.
As Ghana navigates global economic uncertainties, the buoyancy in trade, supported by key commodities and prudent management of reserves, positions the country for continued economic stability and growth.
The data serves as a testament to Ghana’s economic resilience and its ability to leverage trade dynamics for sustained development.
The positive trade balance is a crucial factor in a nation’s economic health, reflecting that the value of exports exceeds that of imports. It provides room for increased investments, foreign exchange reserves, and potential economic growth.
The government’s economic policies and initiatives, as well as global market dynamics, have played a significant role in steering Ghana towards this positive trajectory.
The diversified export portfolio, improvements in export quality, and strategic trade partnerships have contributed to this favorable outcome.
The continuous efforts to strengthen trade relationships, boost exports, and manage imports efficiently have positioned Ghana on a path of sustained economic growth and prosperity.
