Covid-19 could spell disaster for Ghana's budding economy

08 April 2020 3 min. read
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Deloitte has revised its 2020 GDP growth estimates for Ghana from just under 7% to less than 3% in light of the Covid-19 crisis, as the country’s economy faces disruptions from a variety of directions. The country is also expected to face significant losses in tax revenue.

Ghana’s situation is similar to most economies under the Covid-19 crisis, as global supply chains face disruption and closures. Deloitte points out that Ghana’s economy is particularly dependent on imports, which makes it extra susceptible. Figures put forth by the Big Four accounting and advisory firm back up this claim.

The biggest hit is expected to come in the form of revenue shortfalls. Deloitte reports that the country has already faced a “fiscal impact” of more than 9.5 billion Cedi, due in part to revenue shortfalls, which includes nearly 600 million Cedi that has been deployed specifically towards fighting Covid-19.

Impact on the Ghanaian economy

Ghana’s reliance on the oil and petroleum sector also factors in to the Covid-19 impact, in light of shortfalls across the board in petroleum receipts. If this scenario persists unmitigated, Deloitte predicts adverse consequences for Ghana’s economy going forth.

“The economy could suffer from significant decline in Government revenue and expenditure resulting in potential job losses. This could in turn erode the economic gains achieved in recent years and significantly slow down Ghana’s economic development,” states the report.

Ghana has been among the most promising economies in Africa in recent years, expanding rapidly into a key economic centre for Western Africa. The country has attained a degree of political stability in recent years, and has fast become an attraction across the African economy, for business and pleasure.

Reliant on oil much like a number of other African economies, the country has been working on diversifying in recent years, and some experts have pointed out its potential to become a tech hub as well. Deloitte reports that this development will be dealt a significant setback as this crisis intensifies, and debt might also become an issue.

 Covid-19 cases in Ghana

“Additional borrowing and related expenses that will be incurred is likely to increase the country’s debt risk. The unplanned increase in expenditure, particularly in the health sector, could adversely impact the fiscal deficit,” reports Deloitte, highlighting the varying factors that are posing a threat to Ghana’s current economic scenario.

The government will have to take significant action to manage these economic threats, although the immediate threat to health has ben managed in a satisfactory manner according to Deloitte. Ghana’s government sought to learn from the consequences of a relatively slow response (seen in Italy, Spain, etc), and has followed the example set by China and South Korea to successfully contain the virus.

Ghana’s response has included closing borders, mandatory quarantines testing of inbound travellers and the isolation of “selected areas identified as hotspots.” Deloitte expects that the measures are likely to “flatten the curve” in the near future, giving the government room to manage the significant economic fallout.