In the period following the 1966 military coup that overthrew Ghana’s first president, political unrest and centralized, inward-looking development policies led to declining GDP per capita and soaring inflation. In the early 1980s, the difficult political situation was accompanied by a deterioration of the terms of trade, large fiscal imbalances, and rising inflation, which led the country to its worst economic crisis since independence. By 1983 real GDP per capita had fallen to close to half its level of the late 1960s.
In 1981 Jerry Rawlings took power in a military coup during a period of political instability. Under Rawlings, Ghana began a process of transformation from an administrative system of economic management to a market-oriented one. Beginning in 1984, implementation of the Economic Reform Program (ERP) succeeded in raising output and increasing private sector activity and investment, making Ghana one of Africa’s best-performing economies.
The return to a democratic system, with the adoption of a new constitution in April 1992 and the holding, later that year, of presidential and parliamentary elections (the latter for the first time since 1965) was marked by a return to political unrest. In addition, the election period was characterized by high government spending, which worsened macro-economic imbalances and rekindled inflation. Economic reforms came to a halt, inflation increased, and the pace of recovery slowed.
After the 1996 elections, the political situation stabilized, and the new government was able to implement an economic strategy designed to improve macroeconomic stability, foster a favorable environment for private sector development, and reduce poverty. Against this background the country was able to return to a path of macroeconomic stability and output growth in the last years of the 1990s. Figure 3.1 shows that the pattern of output growth in Ghana since 1960 has been sensitive to the political environment as well as to the macro-economic stance of the policies implemented since independence.
Real GDP Per Capita and Inflation Across Political Regimes
Source: IMF International Financial Statistics.1 In constant 1975 cedis.2 In percent.This section reviews trends in GDP and its main components since independence. It identifies some structural constraints that have affected output growth and some potential sources of increases in output in future years. The section begins with a discussion of trends in the main production sectors. This is followed by a review of trends in investment and saving patterns, the financing of the saving-investment gap, and developments in the external sector. Finally, the section explores briefly the key elements of a possible strategy to raise GDP per capita to the level of a middle-income country within a generation.
Sources of Output
Despite recent growth in the mining and construction sectors, Ghana’s low level of industrialization is reflected in its relatively large share of agriculture in GDP7 Mining has been the fastest-growing activity, with the metals and cement industries following closely and providing the base for industrial development. Infrastructural bottlenecks appear to be a key constraint on growth. For example, aluminum and cement production has been suffering from the limited production capacity of the electric power generating industry, and growth of the export sector is severely undermined by the poor condition of the country’s transport sector.
Sectoral Composition of GDP
Ghana has a predominantly rural economy, with agriculture (broadly defined to include forestry and fisheries) accounting for not much less than 40 percent of value added (Table 3.1). The rural sector is relatively large even in comparison with most other countries in Sub-Saharan Africa, although the share of agricultural land in total land is not as high in Ghana as in some of the region’s largest countries (Table 3.2). The services sector has historically been the second largest, accounting for about 30 percent of GDP, with transport services and retail trade among the most important private sector activities. The share of services in value added has been declining, however. The industrial sector has seen rapid growth in recent times, contributing one-fourth of value added in 1997, with the largest contributions deriving from the mining and construction sectors.
Gross Domestic Product by Sector
(In percent of nominal GDP)
Gross Domestic Product by Sector
(In percent of nominal GDP)
Sector | 1975 | 1985 | 1993 | 1998 | |
---|---|---|---|---|---|
Agriculture | 47.7 | 44.6 | 36.9 | 36.0 | |
Agriculture and livestock | 29.7 | 34.3 | 25.7 | 22.5 | |
Cocoa production and marketing | 10.9 | 5.4 | 2.8 | 4.9 | |
Forestry and logging | 5.6 | 3.3 | 2.8 | 3.6 | |
Fishing | 1.5 | 1.5 | 5.7 | 5.0 | |
Industry | 21.0 | 16.6 | 24.8 | 25.3 | |
Mining and quarrying | 2.0 | 1.1 | 5.5 | 5.2 | |
Manufacturing | 13.9 | 11.5 | 9.4 | 9.0 | |
Electricity and water | 0.6 | 1.2 | 2.6 | 2.6 | |
Construction | 4.5 | 2.8 | 7.4 | 8.5 | |
Services | 29.5 | 38.4 | 27.5 | 28.2 | |
Transport, storage, and communications | 3.9 | 5.3 | 4.3 | 4.1 | |
Wholesale and retail trade, restaurants, and hotels | 12.2 | 24.4 | 5.8 | 6.6 | |
Finance, insurance, real estate, and business services | 5.2 | 2.3 | 4.1 | 4.2 | |
Government services | 8.2 | 6.3 | 10.6 | 9.9 | |
Community, social, and personal services | 1.0 | 1.6 | 1.8 | 2.4 | |
Private nonprofit services | 0.5 | 0.1 | 0.9 | 0.9 | |
Bank charges | −1.4 | −1.6 | … | … | |
Indirect taxes | 1.8 | 1.4 | 10.7 | 10.5 |
Gross Domestic Product by Sector
(In percent of nominal GDP)
Sector | 1975 | 1985 | 1993 | 1998 | |
---|---|---|---|---|---|
Agriculture | 47.7 | 44.6 | 36.9 | 36.0 | |
Agriculture and livestock | 29.7 | 34.3 | 25.7 | 22.5 | |
Cocoa production and marketing | 10.9 | 5.4 | 2.8 | 4.9 | |
Forestry and logging | 5.6 | 3.3 | 2.8 | 3.6 | |
Fishing | 1.5 | 1.5 | 5.7 | 5.0 | |
Industry | 21.0 | 16.6 | 24.8 | 25.3 | |
Mining and quarrying | 2.0 | 1.1 | 5.5 | 5.2 | |
Manufacturing | 13.9 | 11.5 | 9.4 | 9.0 | |
Electricity and water | 0.6 | 1.2 | 2.6 | 2.6 | |
Construction | 4.5 | 2.8 | 7.4 | 8.5 | |
Services | 29.5 | 38.4 | 27.5 | 28.2 | |
Transport, storage, and communications | 3.9 | 5.3 | 4.3 | 4.1 | |
Wholesale and retail trade, restaurants, and hotels | 12.2 | 24.4 | 5.8 | 6.6 | |
Finance, insurance, real estate, and business services | 5.2 | 2.3 | 4.1 | 4.2 | |
Government services | 8.2 | 6.3 | 10.6 | 9.9 | |
Community, social, and personal services | 1.0 | 1.6 | 1.8 | 2.4 | |
Private nonprofit services | 0.5 | 0.1 | 0.9 | 0.9 | |
Bank charges | −1.4 | −1.6 | … | … | |
Indirect taxes | 1.8 | 1.4 | 10.7 | 10.5 |
Comparison of Ghana with Other Leading Agricultural Countries in Sub-Saharan Africa
Average of all countries for which data are available.
Comparison of Ghana with Other Leading Agricultural Countries in Sub-Saharan Africa
Agricultural Land (in percent of total land), 1994 | Value Added (in percent of nominal GDP) | ||||
---|---|---|---|---|---|
1970 | 1994 | ||||
Sub-Saharan Africa 1 | 26.6 | Sub-Saharan Africa | 25.4 | ||
Burundi | 86 | Rwanda | 66.2 | Congo, Dem. Rep. of | 65.9 |
Nigeria | 80 | Mali | 66.2 | Ethiopia | 54.8 |
South Africa | 79 | Nigeria | 64.9 | Guinea-Bissau | 52.3 |
Lesotho | 76 | Somalia | 59.4 | Central African Rep. | 50.1 |
Rwanda | 75 | Uganda | 53.7 | Uganda | 50.0 |
Eritrea | 74 | Ghana | 46.5 | Burundi | 49.7 |
Swaziland | 73 | Guinea-Bissau | 47.5 | Equatorial Guinea | 49.1 |
Somalia | 70 | Chad | 47.1 | Tanzania | 46.3 |
Mozambique | 60 | Malawi | 44.0 | Chad | 44.9 |
Ghana | 57 | Sudan | 42.9 | Ghana | 44.8 |
Djibouti | 56 | Nigeria | 41.3 | Rwanda | 43.5 |
Average of all countries for which data are available.
Comparison of Ghana with Other Leading Agricultural Countries in Sub-Saharan Africa
Agricultural Land (in percent of total land), 1994 | Value Added (in percent of nominal GDP) | ||||
---|---|---|---|---|---|
1970 | 1994 | ||||
Sub-Saharan Africa 1 | 26.6 | Sub-Saharan Africa | 25.4 | ||
Burundi | 86 | Rwanda | 66.2 | Congo, Dem. Rep. of | 65.9 |
Nigeria | 80 | Mali | 66.2 | Ethiopia | 54.8 |
South Africa | 79 | Nigeria | 64.9 | Guinea-Bissau | 52.3 |
Lesotho | 76 | Somalia | 59.4 | Central African Rep. | 50.1 |
Rwanda | 75 | Uganda | 53.7 | Uganda | 50.0 |
Eritrea | 74 | Ghana | 46.5 | Burundi | 49.7 |
Swaziland | 73 | Guinea-Bissau | 47.5 | Equatorial Guinea | 49.1 |
Somalia | 70 | Chad | 47.1 | Tanzania | 46.3 |
Mozambique | 60 | Malawi | 44.0 | Chad | 44.9 |
Ghana | 57 | Sudan | 42.9 | Ghana | 44.8 |
Djibouti | 56 | Nigeria | 41.3 | Rwanda | 43.5 |
Average of all countries for which data are available.
Agriculture
Cereals are the main agricultural crop, amounting to about 20 percent of GDP; maize accounts for 60 percent of cereals production, and guinea corn, rice, and millet account for the remainder. Other crops are cassava and yams, and cashew nuts. Cultivation of sunflower and tropical fruits, such as pineapples, has also increased recently, especially because of rising demand for their export to European countries.
Agricultural production barely increased during the 1970s and then contracted sharply during the years of economic crisis (1979–83). Production recovered with the beginning of the ERP in 1983, and it continued to increase throughout the second half of the 1980s. A steady increase in area under cultivation from the beginning of this period through 1994 enabled production to expand, in spite of a decline in fertilizer consumption following the sharp devaluation of the cedi at the beginning of the ERP (most fertilizer is imported). Agricultural experts maintain that the sector still has considerable unexploited potential, which, if fully taken advantage of, would further expand acreage under cultivation and thus provide a solid base for future output expansion.
Among activities in the agricultural sector, fishing has been one of the fastest growing, with catches steadily increasing since 1986. The share of fishing in value added tripled from 1975 to 1998, according to the latest estimates (Table 3.1). In particular, exports of tuna appear to have been among the better performing nontraditional exports. However, in recent years, growth in this subsector has been sluggish, apparently because of overexploitation of some pelagic species. For this reason, output growth of the subsector is expected to stabilize in the future years, as the exploitation of pelagic species reaches its steady-state level.
Despite accounting for only 5 percent of total value added (Table 3.1), cocoa remains among the main export commodities of the Ghanaian economy and one of its main sources of foreign exchange. Cocoa production fell steadily throughout the 1970s and reached an all-time low of 166,000 tons in 1984, less than half of annual output in the early 1970s. After years of neglect, cocoa trees aged, and the low prices paid to cocoa farmers induced smuggling of cocoa to Cote d’Ivoire. Under the ERP the government has been facilitating the development of cocoa production as a driving force behind Ghana’s economic growth. A Cocoa Rehabilitation Program was implemented, which included replanting and maintenance of trees, and the price paid to farmers was increased. This policy succeeded in reversing the decline and increasing volumes considerably. The cocoa crop is expected to reach 500,000 tons by 2004/05—a volume comparable with that in 1964/65. The cocoa sector is discussed in more detail in section IV.
Industry
Industrial output has increased steadily over recent years, although at a slow pace. Manufacturing has traditionally been the largest sector of economic activity outside of agriculture and services, with a share in value added of about 14 percent in 1975 (Table 3.1), placing Ghana well within the top 10 countries in Sub-Saharan Africa. However, its share has been declining and amounted to only about 9 percent of GDP in 1998, small by comparison with other Sub-Saharan countries (Table 3.3). This sector has also been the slowest to recover during the reform period. Average production across manufacturing industries in 1990 was only about 60 percent of its level in 1977, and output in all manufacturing industries, with the exception of cement and iron, was below its level in the 1970s. According to estimates of the Ghana Statistical Service, capacity utilization in manufacturing was only about 40 percent in 1990, further evidence of slow growth. Food processing and textile manufacturing in 1990 were still less than 60 percent of their volume in 1977.
Comparison of Ghana with Other Leading Manufacturing Countries in Sub-Saharan Africa
(Manufacturing sector as a share of GDP)
Average of all countries for which data are available.
Comparison of Ghana with Other Leading Manufacturing Countries in Sub-Saharan Africa
(Manufacturing sector as a share of GDP)
1965 | 1975 | 1985 | 1995 | ||||
---|---|---|---|---|---|---|---|
Sub-Saharan Africa1 | 14.1 | Sub-Saharan Africa | 14.4 | Sub-Saharan Africa | 14.2 | Sub-Saharan Africa | 14.9 |
South Africa | 23.9 | South Africa | 23.7 | South Africa | 23.1 | Swaziland | 34.4 |
Zimbabwe | 19.7 | Zimbabwe | 23.5 | Zimbabwe | 22.9 | Zambia | 27.0 |
Mauritius | 14.3 | Burkina Faso | 19.8 | Zambia | 22.9 | South Africa | 24.3 |
Botswana | 13.1 | Chad | 19.2 | Mauritius | 20.6 | Mauritius | 23.7 |
Burkina Faso | 12.2 | Senegal | 16.4 | Swaziland | 16.7 | Zimbabwe | 21.8 |
Senegal | 11.8 | Mauritius | 16.3 | Chad | 15.9 | Burkina Faso | 19.8 |
Kenya | 11.5 | Zambia | 15.9 | Burkina Faso | 15.3 | Burundi | 19.2 |
Ghana | 9.8 | Ghana | 13.9 | Rwanda | 15.0 | Malawi | 18.7 |
Chad | 9.7 | Malawi | 13.1 | Malawi | 14.5 | Lesotho | 16.4 |
Togo | 9.6 | Rwanda | 13.1 | Mauritania | 12.9 | Chad | 16.3 |
Cameroon | 9.5 | Benin | 12.2 | … | … | ||
Ghana | 11.5 | Ghana | 9.6 |
Average of all countries for which data are available.
Comparison of Ghana with Other Leading Manufacturing Countries in Sub-Saharan Africa
(Manufacturing sector as a share of GDP)
1965 | 1975 | 1985 | 1995 | ||||
---|---|---|---|---|---|---|---|
Sub-Saharan Africa1 | 14.1 | Sub-Saharan Africa | 14.4 | Sub-Saharan Africa | 14.2 | Sub-Saharan Africa | 14.9 |
South Africa | 23.9 | South Africa | 23.7 | South Africa | 23.1 | Swaziland | 34.4 |
Zimbabwe | 19.7 | Zimbabwe | 23.5 | Zimbabwe | 22.9 | Zambia | 27.0 |
Mauritius | 14.3 | Burkina Faso | 19.8 | Zambia | 22.9 | South Africa | 24.3 |
Botswana | 13.1 | Chad | 19.2 | Mauritius | 20.6 | Mauritius | 23.7 |
Burkina Faso | 12.2 | Senegal | 16.4 | Swaziland | 16.7 | Zimbabwe | 21.8 |
Senegal | 11.8 | Mauritius | 16.3 | Chad | 15.9 | Burkina Faso | 19.8 |
Kenya | 11.5 | Zambia | 15.9 | Burkina Faso | 15.3 | Burundi | 19.2 |
Ghana | 9.8 | Ghana | 13.9 | Rwanda | 15.0 | Malawi | 18.7 |
Chad | 9.7 | Malawi | 13.1 | Malawi | 14.5 | Lesotho | 16.4 |
Togo | 9.6 | Rwanda | 13.1 | Mauritania | 12.9 | Chad | 16.3 |
Cameroon | 9.5 | Benin | 12.2 | … | … | ||
Ghana | 11.5 | Ghana | 9.6 |
Average of all countries for which data are available.
The fastest-growing industries have been the cement, petroleum, and metals industries. The privatization of the iron industry in the early 1990s appears to have generated substantial benefits, as iron production, which by 1990 had declined to about 5 percent of its level in 1977, increased its volume sixfold between 1990 and 1996. Sawn wood production experienced strong growth in the second half of the 1980s and through the early 1990s before slowing significantly because of a ban on exports of logs and other environmental constraints. Aluminum production picked up immediately after the beginning of the ERP, although by 1992 output was still below its 1980 levels. More recently, export volumes have been rising steadily, indicating that production has been increasing.
In the mining sector, production increased in the second half of the 1980s and thereafter, reaching 6 percent of GDP in 1997, but the composition of output changed. Extraction of diamonds, which in the 1970s was Ghana’s second-largest mining industry in volume terms, virtually disappeared in the early 1980s. By 1990 the average index for mining output had returned to its 1977 level, as strong increases in the production of bauxite and manganese pushed their volumes to levels one-third higher than those attained in the late 1970s. Strong growth in the mining sector continued in the 1990s, with the average production index increasing by 150 percent in the first six years of the decade. Most of this increase is explained by a doubling of gold production, associated with the privatization of the Ashanti Goldfields Company and strong investment in the industry thereafter. However, iron, bauxite, and manganese production, helped partly by recent privatization in these industries, have also achieved rapid growth, increasing by almost 50 percent in the period 1990–96. This growth has also raised the share of the mining sector in total exports as well as in value added, with gold becoming a main source of foreign currency earnings.
Growth in the construction industry, typically proxied by growth in the production of cement, did not recover until the late 1980s. However, since the beginning of the 1990s, output volumes have grown at a sustained rate, more than doubling between 1990 and 1996. In effect, the share of construction in GDP grew from 4½ percent in 1975 to 8½percent in 1998. Current trends in the construction sector are the main force driving the observed growth rates in fixed capital formation.
Electric power generation has been insufficient to meet the country’s needs since 1994, when Ghana ceased to be a net exporter of electricity. By far the largest single consumer of electricity is VALCO, a United States-owned aluminum firm that buys about 60 percent of total production; the remainder has been directed mainly to the manufacturing sector, as shown by a 60 percent correlation between the manufacturing production index and electricity volumes. Household and private consumption has increased steadily, putting pressure on production. Electric power generation grew to about 3 percent of total value added in 1998, an increase of 250 percent relative to 1975. However, production has not kept pace with growth in the population: at the end of 1995 total consumption per capita had scarcely returned to its 1971 level.
A drought in 1998 lowered water levels in Lake Volta substantially below normal production levels and caused major blackouts throughout the country. These events made evident the structural problems and the capacity constraints in electricity production.8 Although the government had anticipated these constraints, and since the early 1990s has been carrying out a series of publicly financed projects aimed at increasing generating capacity, further development of the industry is fundamental to ensure adequate future output increases.
Transport and Services
The services sector has contracted slightly over the past few decades. When the Ghana Statistical Service recently rebased its estimates of GDP by sector, it reestimated the share of services in value added; the revised data show that the share slightly declined between 1975 and 1998 (Table 3.1). The main cause for delay in the sector’s development appears to be infrastructural constraints.
Transportation as a share of value added has increased by only about ¼percentage point since 1975. The subsector still suffers from major structural problems. The number of rail passengers is less than a third its level in the 1960s, and total cargo volume transported by rail has almost halved. In spite of numerous rehabilitation programs, the country’s roads have been badly maintained. Even traffic volumes at Accra’s international airport have grown slowly. Only activity at the ports has been gradually increasing– a positive spillover of the development of foreign trade. Volumes loaded and unloaded at the main ports are about one-fourth higher than in 1970.
Improvements in the transportation infrastructure will be fundamental to allow for future increases in output in other sectors. For example, mining exporters have been complaining that stocks have accumulated while waiting to be shipped to the ports for export.
No specific estimate of financial services was available for this paper. However, the early 1990s also marked the beginning of a new era in the banking industry, as privatization and restructuring operations increased the volume of financial transactions.
Investment
The share of investment in GDP has historically been lower in Ghana than in other Sub-Saharan African countries. In 1970, when investment-GDP ratios in Gabon and Zambia were averaging about 30 percent, the figure for Ghana was just above 10 percent. This ratio further declined amid the economic crisis that followed, reaching 6 percent in 1980. Its recovery, however, has been remarkable: by 1998 the share of investment in GDP had risen to about 25 percent (Table 3.4), and already in 1996 Ghana’s ratio was high enough to place it among the top 10 countries in the region (Table 3.5). The investment share has been rising in tandem with the external current account deficit, which seems to indicate that Ghana is running structural current account deficits associated with a buildup of fixed capital (Figure 3.2).
Gross Domestic Product by Expenditure Category
(In percent of nominal GDP)
Estimated.
Public sector only.
Gross Domestic Product by Expenditure Category
(In percent of nominal GDP)
Category | 19751 | 1985 | 1993 | 19981 | |
---|---|---|---|---|---|
Consumption | … | 92.4 | 93.4 | 87.7 | |
Government | 24.5 | 10.2 | 14.7 | 10.3 | |
Private sector | 82.2 | 78.7 | 77.4 | ||
Investment | … | 9.5 | 22.2 | 24.7 | |
Gross fixed capital formation | 12.42 | 9.5 | 23.8 | 23.6 | |
Inventories | … | 0.0 | -1.6 | 1.1 | |
Trade in goods and nonfactor services | -2.1 | -1.9 | -15.6 | -12.4 | |
Exports | 20.2 | 9.6 | 17.9 | 34.3 | |
Imports | -22.4 | -11.6 | -33.5 | -46.7 | |
Gross domestic expenditure | 124.5 | 101.9 | 115.6 | 112.4 |
Estimated.
Public sector only.
Gross Domestic Product by Expenditure Category
(In percent of nominal GDP)
Category | 19751 | 1985 | 1993 | 19981 | |
---|---|---|---|---|---|
Consumption | … | 92.4 | 93.4 | 87.7 | |
Government | 24.5 | 10.2 | 14.7 | 10.3 | |
Private sector | 82.2 | 78.7 | 77.4 | ||
Investment | … | 9.5 | 22.2 | 24.7 | |
Gross fixed capital formation | 12.42 | 9.5 | 23.8 | 23.6 | |
Inventories | … | 0.0 | -1.6 | 1.1 | |
Trade in goods and nonfactor services | -2.1 | -1.9 | -15.6 | -12.4 | |
Exports | 20.2 | 9.6 | 17.9 | 34.3 | |
Imports | -22.4 | -11.6 | -33.5 | -46.7 | |
Gross domestic expenditure | 124.5 | 101.9 | 115.6 | 112.4 |
Estimated.
Public sector only.
Comparison of Ghana with Leading Countries in Sub-Saharan Africa by Investment-GDP Ratio
(In percent)
Comparison of Ghana with Leading Countries in Sub-Saharan Africa by Investment-GDP Ratio
(In percent)
1970 | 1980 | 1990 | 1996 | ||||
---|---|---|---|---|---|---|---|
Gabon | 30.4 | Lesotho | 40.3 | Lesotho | 71.4 | Equatorial Guinea | 113.5 |
Zambia | 29.1 | Seychelles | 36.5 | S. Tomé and Principe | 57.2 | Lesotho | 104.3 |
Botswana | 27.1 | S. Tomé and Principe | 34.2 | Mozambique | 44.6 | Congo, Rep. of | 60.7 |
South Africa | 24.7 | Congo Rep. of | 32.9 | Cape Verde | 43.1 | Mozambique | 48.3 |
Côte d’Ivoire | 20.7 | Botswana | 30.2 | Equatorial Guinea | 38.5 | Cape Verde | 33.5 |
Kenya | 19.7 | Comoros | 28.5 | Botswana | 31.8 | Mali | 26.5 |
Zimbabwe | 16.2 | Niger | 28.3 | Guinea-Bissau | 30.9 | Burkina Faso | 26.0 |
Mali | 14.0 | Swaziland | 28.3 | Mauritius | 30.6 | Mauritius | 24.9 |
Congo. Dem. Rep. of | 13.6 | Togo | 28.2 | Togo | 25.3 | Botswana | 24.1 |
Uganda | 13.3 | Namibia | 27.1 | Seychelles | 22.7 | Seychelles | 22.8 |
… | … | … | … | ||||
Ghana | 12.0 | Ghana | 6.1 | Ghana | 14.4 | Ghana | 22.0 |
Comparison of Ghana with Leading Countries in Sub-Saharan Africa by Investment-GDP Ratio
(In percent)
1970 | 1980 | 1990 | 1996 | ||||
---|---|---|---|---|---|---|---|
Gabon | 30.4 | Lesotho | 40.3 | Lesotho | 71.4 | Equatorial Guinea | 113.5 |
Zambia | 29.1 | Seychelles | 36.5 | S. Tomé and Principe | 57.2 | Lesotho | 104.3 |
Botswana | 27.1 | S. Tomé and Principe | 34.2 | Mozambique | 44.6 | Congo, Rep. of | 60.7 |
South Africa | 24.7 | Congo Rep. of | 32.9 | Cape Verde | 43.1 | Mozambique | 48.3 |
Côte d’Ivoire | 20.7 | Botswana | 30.2 | Equatorial Guinea | 38.5 | Cape Verde | 33.5 |
Kenya | 19.7 | Comoros | 28.5 | Botswana | 31.8 | Mali | 26.5 |
Zimbabwe | 16.2 | Niger | 28.3 | Guinea-Bissau | 30.9 | Burkina Faso | 26.0 |
Mali | 14.0 | Swaziland | 28.3 | Mauritius | 30.6 | Mauritius | 24.9 |
Congo. Dem. Rep. of | 13.6 | Togo | 28.2 | Togo | 25.3 | Botswana | 24.1 |
Uganda | 13.3 | Namibia | 27.1 | Seychelles | 22.7 | Seychelles | 22.8 |
… | … | … | … | ||||
Ghana | 12.0 | Ghana | 6.1 | Ghana | 14.4 | Ghana | 22.0 |
Saving, Investment, and the Current Account
(In percent of GDP)
Sources: Ghanaian authorities; IMF staff.The productivity of investment in Ghana, although low by international standards, appears to have been relatively high compared with the Sub-Saharan African average, at least in the past 15 years. From 1985 to 1995 investment accounted for 15–20 percent of the increase in output, a productivity level among the highest in the region (Table 3.6).
Comparison of Ghana with Leading Countries in Sub-Saharan Africa by Productivity of Capital
(In percent) 1
Calculated as the ratio of the average rate of real GDP growth to average investment, in 1985 constant dollars.
Comparison of Ghana with Leading Countries in Sub-Saharan Africa by Productivity of Capital
(In percent) 1
1970–75 | 1975–80 | 1980–85 | 1985–90 | 1990–95 | |||||
---|---|---|---|---|---|---|---|---|---|
Botswana | 48.5 | Botswana | 29.2 | Congo, Rep. of | 36.9 | Botswana | 31.2 | Equatorial Guinea | 27.2 |
Lesotho | 42.3 | Rwanda | 28.9 | Botswana | 32.6 | Chad | 28.8 | Uganda | 21.3 |
Gabon | 36.6 | Mali | 28.2 | Cameroon | 23.0 | Swaziland | 28.6 | Mozambique | 18.7 |
Kenya | 27.4 | Cameroon | 25.9 | Zimbabwe | 18.5 | Mozambique | 23.6 | Mauritius | 15.8 |
Mauritius | 23.6 | Côte d’Ivoire | 25.5 | Rwanda | 14.8 | Mauritius | 22.9 | Ghana | 14.9 |
Côte d’Ivoire | 23.5 | Mauritius | 22.0 | Burundi | 11.2 | Ghana | 20.4 | Botswana | 14.3 |
Ghana | 18.4 | Lesotho | 21.9 | Swaziland | 11.1 | S. Tomé and Principe | 20.4 | Gambia, The | 13.6 |
Congo, Dem. Rep. of | 16.1 | Malawi | 18.6 | Congo, Dem. Rep. of | 9.5 | Nigeria | 20.2 | Swaziland | 13.3 |
South Africa | 14.7 | Kenya | 17.0 | Kenya | 9.4 | Burundi | 18.7 | Guinea | 13.0 |
Zambia | 11.2 | Burundi | 16.3 | Burkina Faso | 9.2 | Seychelles | 18.6 | Nigeria | 12.7 |
Rwanda | 10.9 | … | … | Kenya | 18.5 | Benin | 12.0 | ||
Ghana | -8.0 | Ghana | -6.7 |
Calculated as the ratio of the average rate of real GDP growth to average investment, in 1985 constant dollars.
Comparison of Ghana with Leading Countries in Sub-Saharan Africa by Productivity of Capital
(In percent) 1
1970–75 | 1975–80 | 1980–85 | 1985–90 | 1990–95 | |||||
---|---|---|---|---|---|---|---|---|---|
Botswana | 48.5 | Botswana | 29.2 | Congo, Rep. of | 36.9 | Botswana | 31.2 | Equatorial Guinea | 27.2 |
Lesotho | 42.3 | Rwanda | 28.9 | Botswana | 32.6 | Chad | 28.8 | Uganda | 21.3 |
Gabon | 36.6 | Mali | 28.2 | Cameroon | 23.0 | Swaziland | 28.6 | Mozambique | 18.7 |
Kenya | 27.4 | Cameroon | 25.9 | Zimbabwe | 18.5 | Mozambique | 23.6 | Mauritius | 15.8 |
Mauritius | 23.6 | Côte d’Ivoire | 25.5 | Rwanda | 14.8 | Mauritius | 22.9 | Ghana | 14.9 |
Côte d’Ivoire | 23.5 | Mauritius | 22.0 | Burundi | 11.2 | Ghana | 20.4 | Botswana | 14.3 |
Ghana | 18.4 | Lesotho | 21.9 | Swaziland | 11.1 | S. Tomé and Principe | 20.4 | Gambia, The | 13.6 |
Congo, Dem. Rep. of | 16.1 | Malawi | 18.6 | Congo, Dem. Rep. of | 9.5 | Nigeria | 20.2 | Swaziland | 13.3 |
South Africa | 14.7 | Kenya | 17.0 | Kenya | 9.4 | Burundi | 18.7 | Guinea | 13.0 |
Zambia | 11.2 | Burundi | 16.3 | Burkina Faso | 9.2 | Seychelles | 18.6 | Nigeria | 12.7 |
Rwanda | 10.9 | … | … | Kenya | 18.5 | Benin | 12.0 | ||
Ghana | -8.0 | Ghana | -6.7 |
Calculated as the ratio of the average rate of real GDP growth to average investment, in 1985 constant dollars.
The share of public sector investment has also been declining steadily through the years of the recovery program, dropping to 10 percent in 1996 (Table 3.4). This still represents about 50 percent of total investment. This development is a positive sign of the gradual withdrawal of the public sector from economic activity and the rising importance of the private sector in economic development.
Whereas investment in structures and equipment appears to be increasing steadily, providing the foundation for increasing levels of output, investment in human capital has been lagging behind. Average educational attainment has been declining rather than improving, although enrollment rates appear to have improved in the rural areas. Overall education sector policy is in apparent need of redesign.
Human capital development is a critical input for future development. For this reason a series of programs are currently in place to ensure adequate levels of schooling across the population. Achievement of these levels should favorably influence future growth rates.
Sources of Growth
Output growth in Ghana was hampered by the centralized economic management and inward-looking policies implemented from the mid-1960s to the early 1980s. The economic decline during this period is evident: in 1983 income per capita in constant cedis was about 35 percent lower than in 1970 (Figure 3.3).9 Income per capita in purchasing power parity terms, at constant 1985 dollars, showed a decline of 30 percent in the period 1980–83 alone. As a result, the average Ghanaian in 1996 had about the same income per capita as his father had in 1971. Since 1983. however, sound macroeconomic management, structural reforms, market deregulation, and the restructuring and prioritization of the export sector have been the main factors behind a rising output trend, which has continued uninterrupted for the past 15 years. (Box 3.1 describes the recent growth in the share of nontraditional exports.)
GDP Per Capita
(In constant 1987 US. dollars)
Sources: Ghanaian authorities; and IMF staff.Since the return to a democratic environment in 1992, rising investment and productivity have improved growth prospects over the medium term. In addition, a sustained rise in export volumes, together with increases in domestic saving, has strengthened the macroeconomic position for the future. However, deficiencies in the national accounts statistics call into question both the reliability of reported growth rates of GDP at constant prices as well as the reported level of GDP. The growth rate estimates are affected by weaknesses in the sectoral deflators, and the lack of recent benchmark data affects the accuracy of the reported level of GDP. One area where data collection needs to be greatly improved is the services sector, which is characterized by a large number of small businesses in diverse areas. The flow of direct data through better designed surveys and censuses is crucial to improving the overall reliability of national accounts estimates. Policies dedicated to poverty reduction, given their potential for employment creation in the informal sector, require a sound statistical infrastructure to monitor their effects. Because such capacity building is a long-term process, the government needs to strengthen policies on data development as part of overall public policy.
The main challenge ahead for the Ghanaian economy is to diversify its production base and the range of goods that it exports, which would allow the economy to become less dependent on the agricultural sector and increasingly develop its manufacturing sector (Figure 3.4). The potential for exports to become the “engine of growth” for Ghana is still un-exploited (Figure 3.4. bottom panel). And, although agricultural production has strong potential for future development and could thus provide a solid base for future increases in output (Figure 3.4, middle panel), environmental constraints are likely to limit the development of certain subsectors such as forestry and fishing. In these industries the slow rate of resource renewal would not allow further increases in output without permanently undermining Ghana’s resource base.
The development of manufacturing, through investment in both physical and human capital together with export-oriented production, will be the key to long-term growth in output. Infrastructural bottlenecks– in particular, the limited production capacity of the electric power generating industry and the underdevelopment of the transport sector– appear to be a main constraint.
In the recent past, the transition to a democratic system and an increasingly stable macroeconomic situation have created a favorable environment for the development of the private sector, as evidenced by a rise in its activity in the 1990s. However, to ensure sustained output increases over the medium term, policies will need to continue to promote divestiture, education, and the development of infrastructure. Such policies, if sustained, would set the stage for Ghana to join the ranks of the middle-income countries.
Growth of Nontraditional Exports, 1986–98
Before 1990 the nascent nontraditional export sector contributed less than 5 percent of total exports, with agricultural products accounting for 60–75 percent of total nontraditional exports and processed and semi processed goods 25–40 percent. Exports of handicrafts were negligible, amounting to less than $1 million. As more industries developed after 1992, processed and semiprocessed goods began to overtake agricultural products as a share of total nontraditional exports. By the end of 1998. provisional data show nontraditional exports at $400 million, or nearly 20 percent of total merchandise exports (see table). In 1998 processed and semiprocessed goods were 79 percent of nontraditional exports, agricultural products 19 percent, and handicrafts 2 percent. The growth and change in composition of nontraditional exports reflected to a great extent the recovery of Ghana’s industrial sector as a result of economic reform, privatization, and a more favorable environment for the private sector.
Overall growth in nontraditional exports over the period 1986–98 came mainly from the processed and semiprocessed goods subsectors, which grew by nearly 40 percent annually on average. Processed goods increased from less than 1 percent of Ghana’s exports in 1986 to slightly over 15 percent in 1998– an impressive achievement. Aluminum and wood products, canned foods, and other processed goods industries all registered significant increases in total export shares over this period. Although handicraft exports did not do as well, their share nevertheless increased. In the agricultural sector, horticultural exports were among the better performers, growing by more than 33 percent on average annually, while fish exports have been on a downward trend for various reasons, including lack of refrigeration facilities and difficulties in transportation to major markets.
Major Nontraditional Exports
(In millions of dollars)
On a free-on-board basis.
Major Nontraditional Exports
(In millions of dollars)
Growth Rate | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Category | 1986 | 1987 | 1988 | 1989 | 1990 | 1991 | 1992 | 1995 | 1994 | 1995 | 1996 | 1997 | 1998 | Regression based | Based on end points | |||
Total | 23.8 | 28.0 | 42.4 | 34.7 | 62.3 | 62.5 | 68.4 | 71.7 | 119.3 | 159.6 | 276.2 | 329.0 | 401.7 | 26.5 | 26.6 | |||
Agriculture | 17.8 | 18.8 | 27.1 | 21.2 | 28.8 | 33.0 | 22.0 | 26.1 | 39.2 | 27.4 | 50.3 | 57.4 | 77.8 | 10.4 | 13.1 | |||
Horticulture | 0.5 | 1.0 | 1.6 | 2.5 | 5.0 | 8.4 | 6.6 | 7.7 | 9.3 | 11.5 | 20.7 | 19.2 | 19.8 | 33.6 | 35.9 | |||
Fish | 14.6 | 14.7 | 21.1 | 13.2 | 21.5 | 20.0 | 11.1 | 14.8 | 11.4 | 7.3 | 12.4 | 18.7 | 21.0 | −1.1 | 3.1 | |||
Other | 2.7 | 3.1 | 4.4 | 5.4 | 2.3 | 4.6 | 4.1 | 3.6 | 18.5 | 8.6 | 17.2 | 19.5 | 37.0 | 21.7 | 24.4 | |||
Cocoa wastes | 2.1 | 2.4 | 2.9 | 2.2 | 1.8 | 1.8 | 0.7 | 0.2 | 0.2 | 1.1 | 1.0 | 2.2 | 3.6 | -5.4 | 4.6 | |||
Processed and semi-processed | 5.9 | 9.1 | 15.2 | 13.3 | 33.0 | 28.6 | 44.9 | 43.0 | 77.8 | 130.2 | 223.0 | 266.9 | 317.5 | 39.5 | 39.4 | |||
Wood | 1.5 | 2.1 | 3.3 | 3.8 | 5.5 | 5.5 | 15.5 | 18.8 | 30.1 | 37.5 | 66.9 | 71.0 | 84.6 | 43.2 | 39.9 | |||
Aluminum products | 0.1 | 0.7 | 6.1 | 2.5 | 9.8 | 9.8 | 4.9 | 3.6 | 5.2 | 7.7 | 1.9 | 5.8 | 12.2 | 21.7 | 49.2 | |||
Canned foods | 2.0 | 1.6 | 0.5 | 0.1 | 0.1 | 1.2 | 1.5 | 1.7 | 16.3 | 41.5 | 48.5 | 51.8 | 80.3 | 60.8 | 36.0 | |||
Salt | 0.8 | 1.9 | 2.5 | 3.1 | 7.0 | 3.9 | 3.8 | 3.0 | 4.4 | 4.3 | 3.2 | 1.8 | 2.8 | 4.4 | 10.9 | |||
Other | 1.5 | 2.7 | 2.8 | 3.8 | 10.6 | 8.2 | 19.2 | 15.9 | 21.8 | 39.2 | 102.5 | 136.5 | 137.6 | 47.0 | 45.7 | |||
Handicrafts | 0.1 | 0.1 | 0.1 | 0.2 | 0.5 | 0.9 | 1.5 | 2.6 | 2.3 | 2.0 | 2.9 | 4.7 | 6.4 | 44.5 | 41.4 | |||
Memoranda | ||||||||||||||||||
Total merchandise | ||||||||||||||||||
exports1 | 749.3 | 823.8 | 881.0 | 808.4 | 897.0 | 998.0 | 986.31 | 063.61 | 226.7 | 1,431.2 | 1,810.2 | 1,810.2 | 2,091.4 | 88 | 8.9 | |||
Traditional exports | 725.5 | 795.8 | 838.7 | 773.7 | 834.7 | 935.5 | 917.9 | 991.9 | 1,107.4 | 1,271.6 | 1,534.0 | 1,481.2 | 1,689.7 | 7.2 | 7.3 |
On a free-on-board basis.
Major Nontraditional Exports
(In millions of dollars)
Growth Rate | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Category | 1986 | 1987 | 1988 | 1989 | 1990 | 1991 | 1992 | 1995 | 1994 | 1995 | 1996 | 1997 | 1998 | Regression based | Based on end points | |||
Total | 23.8 | 28.0 | 42.4 | 34.7 | 62.3 | 62.5 | 68.4 | 71.7 | 119.3 | 159.6 | 276.2 | 329.0 | 401.7 | 26.5 | 26.6 | |||
Agriculture | 17.8 | 18.8 | 27.1 | 21.2 | 28.8 | 33.0 | 22.0 | 26.1 | 39.2 | 27.4 | 50.3 | 57.4 | 77.8 | 10.4 | 13.1 | |||
Horticulture | 0.5 | 1.0 | 1.6 | 2.5 | 5.0 | 8.4 | 6.6 | 7.7 | 9.3 | 11.5 | 20.7 | 19.2 | 19.8 | 33.6 | 35.9 | |||
Fish | 14.6 | 14.7 | 21.1 | 13.2 | 21.5 | 20.0 | 11.1 | 14.8 | 11.4 | 7.3 | 12.4 | 18.7 | 21.0 | −1.1 | 3.1 | |||
Other | 2.7 | 3.1 | 4.4 | 5.4 | 2.3 | 4.6 | 4.1 | 3.6 | 18.5 | 8.6 | 17.2 | 19.5 | 37.0 | 21.7 | 24.4 | |||
Cocoa wastes | 2.1 | 2.4 | 2.9 | 2.2 | 1.8 | 1.8 | 0.7 | 0.2 | 0.2 | 1.1 | 1.0 | 2.2 | 3.6 | -5.4 | 4.6 | |||
Processed and semi-processed | 5.9 | 9.1 | 15.2 | 13.3 | 33.0 | 28.6 | 44.9 | 43.0 | 77.8 | 130.2 | 223.0 | 266.9 | 317.5 | 39.5 | 39.4 | |||
Wood | 1.5 | 2.1 | 3.3 | 3.8 | 5.5 | 5.5 | 15.5 | 18.8 | 30.1 | 37.5 | 66.9 | 71.0 | 84.6 | 43.2 | 39.9 | |||
Aluminum products | 0.1 | 0.7 | 6.1 | 2.5 | 9.8 | 9.8 | 4.9 | 3.6 | 5.2 | 7.7 | 1.9 | 5.8 | 12.2 | 21.7 | 49.2 | |||
Canned foods | 2.0 | 1.6 | 0.5 | 0.1 | 0.1 | 1.2 | 1.5 | 1.7 | 16.3 | 41.5 | 48.5 | 51.8 | 80.3 | 60.8 | 36.0 | |||
Salt | 0.8 | 1.9 | 2.5 | 3.1 | 7.0 | 3.9 | 3.8 | 3.0 | 4.4 | 4.3 | 3.2 | 1.8 | 2.8 | 4.4 | 10.9 | |||
Other | 1.5 | 2.7 | 2.8 | 3.8 | 10.6 | 8.2 | 19.2 | 15.9 | 21.8 | 39.2 | 102.5 | 136.5 | 137.6 | 47.0 | 45.7 | |||
Handicrafts | 0.1 | 0.1 | 0.1 | 0.2 | 0.5 | 0.9 | 1.5 | 2.6 | 2.3 | 2.0 | 2.9 | 4.7 | 6.4 | 44.5 | 41.4 | |||
Memoranda | ||||||||||||||||||
Total merchandise | ||||||||||||||||||
exports1 | 749.3 | 823.8 | 881.0 | 808.4 | 897.0 | 998.0 | 986.31 | 063.61 | 226.7 | 1,431.2 | 1,810.2 | 1,810.2 | 2,091.4 | 88 | 8.9 | |||
Traditional exports | 725.5 | 795.8 | 838.7 | 773.7 | 834.7 | 935.5 | 917.9 | 991.9 | 1,107.4 | 1,271.6 | 1,534.0 | 1,481.2 | 1,689.7 | 7.2 | 7.3 |
On a free-on-board basis.