Deutsche Bank
Research
Ghana
Short-term challenges,
good long-term prospects
Dr. Claire Schaffnit-Chatterjee
Tel. +49 69 910-31821
July 2015
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
Agenda
Deutsche Bank
Research
1
Ghana in Sub-Saharan Afric a
2
Fiscal and currency challenges
3
Good long-term prospects
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
1
A middle-income country
GDP per capita
USD, 2014
Equ. Guinea
Seychelles
Gabon
Tunisia
Morocco
Mauritius
Botswana
South Africa
Namibia
Libya
Angola
Cabo Verde
Swaziland
Nigeria
Congo
Mauritania
Zambia
Mali
Côte d'Ivoire
Niger
Chad
Ghana
Senegal
Dakar
Kenya
Burkina Faso
Gambia
Cameroon
Ouagadougou
GuineaGuinea
Chad
Kano
Bissau
Benin
Lesotho
Nigeria
Senegal
Sierra Leone
Ibadan
Ghana
Cote d‘Ivoire
Zimbabwe
Lagos
Central African Republic
Liberia
Tanzania
Yaounde
Accra
Togo
Benin
Abidjan
Doula
Sierra
Leone
Cameroon
Uganda
Republic of
Rwanda
Equatorial Guinea
Gabon
the Congo
Burkina Faso
Togo
Mozambique
Guinea-Bissau
Ethiopia
Economic Community of West African States (ECOWAS)
Madagascar
DRC
Source: Deutsche Bank Research
0
5,000
10,000
Sources: IMF, Deutsche Bank Research
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
15,000
20,000
2
A relatively large economy in Sub-Saharan Africa
GDP and population
Among the largest of the bulk
GDP size, USD bn, 2014
GDP, USD bn, 2014
70
600
Nigeria
Kenya
60
500
Ethiopia
50
Tanzania
400
South Africa
40
300
30
200
100
Ghana
0
0
50
Ethiopia
DRC
100
150
200
10
Sierra
Leone
0
0
USD 39 bn
Ghana 26 m people
Mozambique
Madagascar
Rwanda
20
40
Population, m
Sources: IMF, Deutsche Bank Research
Deutsche Bank
Research
DRC
Cameroon
Uganda
Zambia
20Gabon Senegal
Angola
Kenya
Tanz.
Côte
d'Ivoire
60
80
100
Population, m
Source: IMF, Deutsche Bank Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
3
Robust growth in the last decade
Fastest-growing SSA economies
Slowing down since 2012
Real GDP growth, % yoy, 2004-2014
Real GDP growth, % yoy
Ethiopia
Angola
China
Chad
Rwanda
India
Sierra Leone
Zambia
Nigeria
Mozambique
Ghana
Uganda
Liberia
DRC
Tanzania
Equatorial Guinea
Burkina Faso
SSA
Malawi
Niger
Namibia
14
12
10
SSA
8
6
4
2
0
2
4
Sources: IMF, Deutsche Bank Research
Deutsche Bank
Research
Ghana
6
8
10
12
0
2000
2002
2004
2006
2008
2010
2012
2014
Sources: IMF, Deutsche Bank Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
4
Agenda
Deutsche Bank
Research
1
Ghana in Sub-Saharan Africa
2
Fiscal and currency challenges
3
Good long-term prospects
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
5
Macroeconomic challenges
Twin deficits
Public debt rising to high level
Fiscal balance, % GDP, 2014
0
Cote d'Ivoire
-2
Nigeria
Ethiopia
Angola
Tanzania
-4
Uganda
South Africa
Zambia
% GDP
80
70
60
50
40
30
20
10
0
2008 2009 2010
FCY denominated
2011
2012 2013 2014
LCY denominated
2015 2016
SSA
Sources: IMF, Deutsche Bank Research
-6
Kenya
Interest costs
% GDP
-8
Mozambique
Ghana
-10
without FDI
-12
-15
-10
-5
0
5
10
Current account + FDI, % GDP
8
7
6
5
4
3
2
1
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Domestic debt
Foreign debt
Sources: IMF, Deutsche Bank Research
Sources: IMF, Deutsche Bank Research
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
6
Poor fiscal discipline
Expenditure has been climbing
Large wage bill to be contained
Fiscla accounts, % GDP
Share of tax revenue, %
35
70
Dec 2012
elections
Dec 2008
elections
60
30
50
25
40
Expenditure
30
20
20
Revenue
15
10
10
2000
0
2002
2004
2006
2008
Sources: IMF, Deutsche Bank Research
Deutsche Bank
Research
2010
2012
2014
2011
2016
2012
2013
2014
2015
2016
Sources: IMF, Deutsche Bank Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
7
Falling FX reserves and high inflation
High inflation
FX reserves under pressure
25
6.0
25
USD bn
5.5
CPI (monthly, % yoy)
20
20
5.0
Policy interest rate
(% p.a.)
4.5
15
15
10
10
4.0
3.5
months of imports
3.0
5
5
SSA middle-income
CPI (annually, % yoy)
2.5
2.0
2011
0
2012
2013
2014
Source: Ghana Statistical Service, Deutsche Bank Research
Deutsche Bank
Research
0
06
2015
07
08
09
10
11
12
13
14
15
Sources: IHS Global GmbH, IMF, Deutsche Bank Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
8
Ghana affected by falling commodity prices
Falling commodity prices
Ghana's exports: Gold, oil, cocoa
USD/unit
USD, bn
4,500
Oil (right)
160
14
140
12
120
10
100
8
Cocoa (left)
4,000
3,500
3,000
2,500
80
2,000
60
1,500
6
4
40
1,000
2
Gold (left)
20
500
0
0
2007
0
07
08
09
10
11
12
13
Sources: IHS Global GmbH, Deutsche Bank Research
Deutsche Bank
Research
14
15
2008
Cocoa
2009
Gold
2010
2011
2012
Petroleum
2013
2014
Other
Sources: UNCTAD, IMF, Deutsche Bank Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
9
Impact on markets
Currency depreciation
Eurobond yields
LCY per USD, % change, since Jan 2014
%, p.a.
10
10
0
9
Kenya
-10
8
Angola
Nigeria
-20
7
Zambia
-30
6
-40
USD 1 bn Eurobond
USD 1.7 bn Cocobod loan
5
Jul 13
Ghana
-50
Jan 14
Apr 14
Jul 14
Okt 14
Jan 15
Deutsche Bank
Research
Ghana 2014
Gabon 2013
Apr 15
Sources: Central banks, HIS Global GmbH, Deutsche Bank Research
Nov 13
Mar 14
Jul 14
Nov 14
Nigeria 2013
Kenya 2014
Mar 15
Zambia 2012
Ghana 2007
Source: Bloomberg
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
10
IMF programme in place since April 2015
3-year Extended Credit Facility for USD 918 m
Main goals:
Next steps:
Fiscal consolidation
- Spending restraints regarding the wage bill and
energy subsidies, while allowing for priority
spending
- Increased revenue through higher petroleum
taxes and VAT
Structural reforms
- Focused on public finances management,
budget transparency and natural resource
management
- An IMF mission conducted the first progress
review in June and concluded that the
programme is on track.
- Disbursement of the second USD 114 m
tranche likely after the IMF Board meeting in
August.
- The government plans a Eurobond issuance
(USD 1 bn, 10 year) – envisaged under the
IMF programme (Source: IMF)
Improved monetary policy
- Medium-term inflation target of 8%
- Increased autonomy and better governance of
the Bank of Ghana
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
11
Agenda
Deutsche Bank
Research
1
Ghana in Sub-Saharan Africa
2
Fiscal and currency challenges
3
Good long-term prospects
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
12
Ghana’s key strengths
— Wealth of natural resources (land, gold, oil and gas)
— Changing economic structure
— Favourable demographics
— Growth more inclusive than African peers
— Democratic track record
— Political stability
— Sound governance
— Favourable business environment
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
13
GDP growth to remain robust
Expected among the fastest growing countries
Real GDP growth, % yoy, 2015-2019
Ethiopia
DRC
Mozambique
India
Rwanda
Côte d'Ivoire
Niger
Tanzania
Kenya
Zambia
The Gambia
China
South Sudan
Chad
Burkina Faso
Togo
Ghana
Liberia
Guinea
Uganda
Malawi
0
1
2
3
4
5
6
7
8
9
Sources: IMF, Deutsche Bank Research
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
14
Long-term growth to be boosted
by oil and gas developments
Oil production: Yet to peak
Gas production: Ambitious plans
Thousands barrels per day for the three oilfields
Million cubic feet per day
250
350
300
200
250
150
200
150
100
100
50
50
0
10
Jubilee
12
14
16
18
20
Tweneboa-Enyenra Ntomme
22
10
12
Jubilee
Sankofa
Sources: Ghana National Petroleum Corporation, Deutsche Bank Research
Deutsche Bank
Research
0
24
14
16
18
20
Tweneboa-Enyenra Ntomme
22
24
Sankofa
Sources: Ghana National Petroleum Corporation, Deutsche Bank Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
15
Power situation to be improved
A drag at the moment
Potential to boost growth
- Poor power supply is a serious limitation
to economic growth
- The development of reliable power
supply is part of the IMF arrangement
- Power outages increased in 2014
- Gas production should help
- Installed capacity supply:
50% hydropower, 50% thermal power
- Dependable supply is below capacity
due to: - poor rainfalls,
- delayed coming on stream of
new power plants, and
 lower costs for electricity generation,
 boost thermal power generation, and
 provide higher, more predictable power
supply
- This requires reform of the energy sector
to proceed without delays
- inadequate gas supply from
Nigeria
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
16
Changing GDP structure
Broad-based growth with expanding secondary and tertiary sectors
Share of GDP
100%
90%
Others
80%
Financial intermediation
Information and communication
70%
Transport and storage
Hotels and restaurants
Trade, repair of vehicles, household goods
Electricity, water and sewage
Construction
60%
50%
40%
Manufacturing
30%
Mining and quarrying
20%
Agriculture
10%
0%
07
08
09
10
11
12
13
14
Sources: Ghana Statistical Service, Deutsche Bank Research
- Agriculture is a key sector: it represents 23% of GDP, 45% of the workforce and has
large untapped potential
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
17
Favourable demographics,
provided jobs are created
Bulging SSA population
Population, bn
Declining dependency ratio
12
10
Ratio of young (0-14) and old (65+) people to the
population of working age (15-64)
Rest of the world
8
SSA
6
1.0
4
SSA
Asia
2
0.9
2100
2090
2080
2070
2060
2050
2040
2030
2020
2010
2000
1990
1980
1970
1960
1950
0
0.8
Sources: UN, Deutsche Bank Research
Ghana
0.7
Youth surge
SSA population, million
0.6
2,000
1,800
1,600
Over 65
1,400
0.5
1,200
Emerging markets
25-64
1,000
0.4
1980
800
600
2000
2020
2040
2060
2080
400
Less than 25
200
Sources: UN population division, Deutsche Bank Research
2050
2040
2030
2020
2010
2000
1990
1980
1970
1960
1950
0
Sources: UN population division, Deutsche Bank Research
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
18
Growth more inclusive than African peers
Ghana outperformed in reducing poverty, improving social indicators
Human Development Index (HDI):
Improving from a low base
3 HDI components
- Life expectancy: 61.1 (SSA: 56.8)
0.80
Latin America
0.75
East Asia
0.70
0.65
South Asia
0.60
- Expected years of schooling: 11.5 (SSA: 9.7)
- Income per capita: PPP USD 3,500 (SSA: 3,100)
Great progress on:
- poverty (52% in 1991 to 24% in 2013)
Ghana
0.55
0.50
Sub-Saharan Africa
- hunger
- education
0.45
- access to water
0.40
- unemployment (low at 5%)
0.35
0.30
1980
90
00
05
08
10
11
12
13
Slower progress on: - under-5 mortality
Sources: UNDP, Deutsche Bank Research
- maternal health
- income inequality
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
19
Long history of democracy and sound governance
Democratic track record
Democracy firmly established since
the 1992 constitution:
- 5 free and fair elections
- 2 peaceful handovers despite
close results
Governance indicators
Voice and
accountability
0.50
Control of
corruption
Political stability
and absence of
violence
-0.50
-1.50
-2.50
Government
effectiveness
Rule of law
Political stability
Limited popular unrest due to well
entrenched democratic process
Regulatory
quality
Ghana
Nigeria
Kenya
Estimates range from -2.5 to 2.5.
The higher the value, the stronger the governance
Source: World Bank
Deutsche Bank
Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
20
Favourable business environment,
large FDI
Ease of Doing Business 2015
Net FDI
Rank out of 189 (overall rank for Ghana: 70)
% GDP
Starting a business
12
Dealing with construction…
10
Getting electricity
Ghana
Registering property
8
Getting credit
Protecting minority investors
6
Paying taxes
4
Trading across borders
SSA
Enforcing contracts
2
Resolving insolvency
0
Ghana
Source: World Bank
Deutsche Bank
Research
100
Kenya
Nigeria
200
0
2004
2006
2008
2010
2012
2014
2016
Sources: IMF, Deutsche Bank Research
Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
21
Disclaimer
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Deutsche Bank
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Dr. Claire Schaffnit-Chatterjee, Tel. +49 69 910-31821
July 2015
22