Ghana cuts growth outlook to lowest in more than 30 years

Ghana cut its economic growth forecast for 2016 to the lowest rate in more than three decades as the country reduced its targets for oil and gold production.

West Africa’s largest economy after Nigeria will likely expand 3.2 percent this year after growing 3.9 percent in 2015, Finance Minister c said in a statement on the ministry’s website. That will be the slowest rate since 1983, when the economy contracted 4.6 percent, according to World Bank data. The government previously forecast a 5.4 percent expansion in 2016 while gross domestic product rose 4.9 percent in the first quarter from a year earlier.

The change in the growth outlook for the year follows a revision of gold production forecasts for 2016 to 2018 and the shut down of the FPSO Kwame Nkrumah oil production vessel on the Jubilee oil field, Terkper said in the statement that will serve as a guideline for the preparation of the medium-term budget.

The lower growth outlook will “impact on taxes, public debt growth” and the currency, Sampson Akligoh, managing director of InvestCorp. Ltd. in the capital, Accra, said by phone on Monday. “Domestically we’re going to see an increase in government borrowing.” Ghana’s debt was 71 percent of GDP in 2015.

The cut in Ghana’s growth outlook comes after the country turned to the International Monetary Fund in April last year for a loan of almost $1 billion to help rein in the deficit and arrest declines in the currency as lower prices for its gold, cocoa and oil exports and 24-hour power cuts weighed on the economy.

Ghana revised its fiscal deficit target for 2016 to 5 percent of gross domestic product from 5.3 percent, Terkper said in the statement. The country wants to narrow the gap by improving revenue collection and cutting expenditures, Terkper said. The fiscal deficit may improve to 3.6 percent of GDP in 2017, 3 percent in 2018 and 2.3 percent in 2019, he said.

Undervalued Cedi

“It is very positive the fiscal balance remains within target,” Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital Ltd. in Johannesburg, said by phone. “The cedi is undervalued so it will have a propensity to appreciate given some sort of event, so given the news today of positive fiscal numbers, that will help.”

The currency was little changed at 3.9425 per dollar after rising as much as 1.6 percent.

The nation forecasts total income of 56.7 billion cedis ($14.4 billion) in 2016, 60.1 billion cedis in 2018 and 67.3 billion cedis in 2019, the ministry said in the statement.