Ghana had a score of 50.9 out of 100 in Fitch’s trade and investment study. Ghana exceeded the West African average of 36.4 and is currently ranked 2nd regionally and 88th internationally out of 201 markets.
According to the surveys, Ghana surpassed the West African average of 33.3 and is ranked first in the region and 90th out of 201 markets globally, with a Crime and Security Risk score of 51 out of 100.
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Lower public investment would stifle Ghana’s construction industry’s expansion.
Aspects to Consider
• We expect Ghana’s construction industry to rise by 4.1 percent year over year in 2022, down from 5.7 percent year over year in 2021.
Higher oil and gold prices are unlikely to boost Ghana’s infrastructure development business, since we expect greater state income to go toward debt payment and Ghana’s hefty public salary bill rather than capital projects.
• We expect a significant depreciation of the cedi against the US dollar in 2022 to make private sector investors less willing to invest in Ghana’s infrastructure and construction sector in the near term, offsetting the negative impact of low public infrastructure spending on the market’s construction industry growth.
We expect Ghana’s construction sector will rise by 4.1 percent year over year in 2022, down from 5.7 percent year over year in 2021. Unlike in other markets, Ghana’s infrastructure construction industry is unlikely to benefit from higher oil and gold prices, as we expect that increased public revenues will be channeled towards debt servicing and Ghana’s high public wage bill rather than capital projects, as Ghana’s access to international capital markets will be constrained in the near term.
Accordingly, we forecast government capital expenditure to shrink to 3.3% y-o-y of GDP in 2022 and 2.9% y-o-y of GDP in 2023, down from 3.7% y-o-y in 2021. While this puts capital expenditure levels above those in 2018-2020, when Ghana’s construction industry growth averaged -0.1% per year, it remains below the comparatively high annual average levels of 4% of GDP between 2010 and 2017, which enabled the construction industry growth rates averaging 8.1% per year.
In 2023, we forecast Ghana’s construction industry growth to accelerate slightly as we forecast the depreciation of the Cedi against the USD to slow down to 4.6% y-o-y.
Generally, this will reduce revenue risks for foreign investors, while lower inflation will improve demand for residential and non-residential construction.
However, Ghana’s access to international capital markets will remain constrained and will continue to weigh on public infrastructure spending as well as the market’s construction industry growth.
Muted Public Spending Limits Construction Growth
Ghana – Government Capital Expenditure, % of GDP; Construction Industry Value, real growth, % y-o-y
Despite the market’s strong fundamentals, including a track record of private investment in energy infrastructure, comparatively high political stability and security, and a relatively diverse competitive landscape, we expect that a substantial depreciation of the cedi against the USD in 2022 will, in the near term, make private investors more reluctant to invest in Ghana’s infrastructure sector.
We, thus, do not expect that private investment will meaningfully cushion the negative impact of subdued public infrastructure spending on the market’s construction industry growth. We forecast that in 2022, the Ghana cedi will depreciate by 22.7% against the USD, significantly increasing revenue risks for the foreign investors that rely on expatriation of revenues.
Economic Openness Boosts Operating Environment In Ghana
Ghana & Regional Average – Trade & Investment Risk
Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Trade and Investment Risk Index
At the same time, Ghana is ranked #1 among the 16 West African markets covered in Fitch Solutions’ proprietary Operational Risk Index.
Ghana surpasses the West African average of 36.4 with a Trade and Investment Risk score of 50.9 out of 100, placing it in a competitive 2nd place regionally and 88th out of 201 markets internationally.
Similarly, Ghana beats the West African average of 33.3 with a Crime and Security Risk score of 51 out of 100, ranking first regionally and 90th out of 201 markets internationally.