The Institute of Economic Affairs (IEA) has highlighted that Ghana’s economy continues to perform below its full potential, citing low public investment, macroeconomic instability, and the high cost of doing business as primary barriers to sustained economic growth.
In its latest bi-monthly Economic Outlook, the IEA outlined specific recommendations aimed at leveraging Ghana’s natural resources, increasing public investment, and reducing business costs to drive sustainable growth.
Ghana faces structural issues including inadequate public investment in infrastructure and services, unstable macroeconomic conditions, and high costs of doing business, which collectively limit economic expansion and deter investment. The IEA argues that these challenges need to be addressed to unlock Ghana’s economic potential fully.
“Sector-specific data further reveals some consistent growth in agriculture, which recorded steady positive rates between 4.3% and 5.4%. The services sector also displayed positive growth, ranging between 3.2% and 6.0%, driven by increasing demand in finance, telecommunications, and public administration.
“However, the industrial sector exhibited erratic growth patterns, fluctuating significantly from quarter to quarter. For example, industry saw negative growth rates in the second and third quarters of 2023 but rebounded in subsequent quarters, with growth rates ranging from 1.6% to 9.3%,” the report noted.
Data from the Ghana Statistical Service (GSS) showed promising signs of economic recovery, with year-on-year GDP growth rising from 2.5% to 6.9% between Q2 2023 and Q2 2024. Non-oil GDP also saw positive trends, increasing from 3.1% to 7.0% over the same period, reflecting resilience amid post-pandemic recovery efforts.
Growth in agriculture and services remained consistent, driven by demand in finance and telecommunications, while the industrial sector displayed volatility, primarily due to fluctuations in oil output. The IEA identifies this dependency on oil revenue as a risk, underscoring the need for economic diversification into manufacturing and value-added production.
The IEA recommends leveraging Ghana’s natural resources to invest in physical and human capital. Increased revenue from responsibly managed resources could fund critical sectors like infrastructure, healthcare, and education, providing a foundation for sustained economic growth.
Reducing the cost of doing business by streamlining regulatory processes, enhancing energy supply, and improving infrastructure is also essential to boost investor confidence and support private sector expansion.
The IEA emphasizes the importance of maintaining macroeconomic stability by controlling inflation, stabilizing the cedi, and implementing prudent fiscal policies. Stability in these areas would enhance investor confidence and allow Ghana to better manage external economic challenges.
