The Ghanaian Economy in 2020
The roll-out of COVID-19 vaccines coupled with a decrease in the number of cases and the easing of restrictions is expected to lessen tenuous market sentiments resulting from the discovery of new strains and the second wave that started in the early parts of Q1 2021. The Ghana economy appears to be on its way out of the harshest moments of the pandemic. The IMF had projected a 6.8% GDP growth rate for the economy - making it one of the faster growing economies of Sub-Saharan African. But this was before the pandemic and actual figures were lower - 6.5%, driven by policies to promote agriculture and manufacturing. The Fund, revisiting its crystal ball, divines a 4.8% real GDP growth in 2021 hinged on a recovery in mining and services.
To strengthen the economy, grow employment and advance its Ghana beyond aid agenda, the presidency announced a reduction in its dependency on exports, opting to process in-country. This is critical to the global chocolate market headquartered in Switzerland and will shake up the 200-year industry. Ghana ranks second on the global list of exporters. Inflation numbers reached 8.5% in April 2021 and National budget estimates recorded three consecutive years of trade surpluses totalling $2.26Bn. GDP growth has also averaged 7% in the last three years. Exchange rates have been competently managed - a condition for its loans with the World bank. FX reserves stood at $6.84Bn in March, according to the CEIC dropping from $9bn in April 2020.
As with much of the world, the pandemic led to unprecedented readjustments, causing trade imbalances, shortfalls in commodity prices and international capital flows. It also led to an increase in expenditure in the healthcare sector, reduction in trade volumes and tight financial conditions. The pandemic led to a diverse array of market sentiments among the investor community as the pandemic negatively impacted livelihoods and left its mark on economic and financial gains attained in the preceding three years. Foreign Direct I n v e s t m e n t s s l o w e d i n 2 0 2 0 . Macroeconomic data for the final quarter of 2020 and the first quarter of 2021 indicate signs of a recovery driven by easing restrictions and vaccine administration. Recovery from the pandemic has been slow yet steady.
Downward pressure on prime rents resulted in an 8 - 12% decline YoY. 1 to 2 year upfront rent payments are still required. There is a mismatch in demand and supply in a few sub-sectors. Our findings suggest an oversupply in 3-bed apartments combined with undersupply in smaller units. The growth in demand for short-lets will put temporary pressure on hotel room rates. Mortgage buyers constitute less than 10% of homebuyers and the mortgage to GDP ratio is less than 1% of GDP. The debt levels in Ghana's market remain low and we expect market corrections in rent and occupancy levels.
Overall, the impact of the pandemic was more pronounced in the hospitality and office submarkets. And while several countries experienced a decline in footfall, the impact on Ghana's retail sector is less noticeable. Office vacancies continue to rise, following an increase in the supply of new office developments. Prime office rents have declined substantially - but this is not the case with well-built lowrise buildings who seem to have sustained both tenancies and rents. That notwithstanding, the majority of retail vacancies can be attributed to the effect of the pandemic and the gradual development in online retail. The decline in hospitality was a direct effect of travel restrictions. The residential sector has continued on its growth path evidenced in the continuous supply of new residential units and moderation in residential vacancies. Increased demand for last-mile logistic facilities is foreseen as online retail continues to develop.
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