Economy rebounds, strengthening sentiment among CEOs


The first edition of the Business Barometer: Ghana CEO Survey, carried out by the Oxford Business Group (OBG) has revealed strong confidence levels among senior executives in the economy, suggesting that reforms aimed at steadying the economy are beginning to yield results.

As part of its year-long survey, the global research and consultancy firm asked over 100 C-suite executives from across the country’s industries a wide-ranging series of questions on a face-to-face basis aimed at gauging business sentiment.

The vast majority (91%) of respondents surveyed described their expectations for the local business environment this year as positive or very positive – while in answering a separate question 80% thought the company they represented is likely, or very likely, to make a significant capital investment over the same period.

OBG’s survey was undertaken as the phased implementation of new policies aimed at galvanising growth and diversifying the economy away from hydrocarbons gathers momentum.

When asked which policy they would like to see prioritised to support growth, almost two-thirds (62%) of respondents put improving the business environment at the top of their list, well ahead of administrative reform and reducing the deficit – which came second and third respectively, and were both selected by less than 15% of those surveyed.

Asked which external factors they felt could weigh most heavily on growth, some 37% of business leaders interviewed cited rising oil prices, indicating the key role that hydrocarbons continue to play in the national economy, followed by regional instability and easing demand growth in China.

A separate question on doing business in Ghana, meanwhile, revealed the challenges that executives sometimes face when it comes to borrowing – with 70% of those surveyed describing access to credit as difficult or very difficult.

Business sentiment has improved on the back of the positive performance, which is expected to continue – with the IMF forecasting GDP growth in 2018 of 8.9% and a reduction in the public debt to 66.1% of GDP, down from an estimated 70.5% at the end of 2017.

2017, the year of reform

With the election of a new government headed by President Akufo-Addo in January 2017, the country’s primary focus has been to bring the economy back on track through enhanced fiscal and monetary discipline, and debt management. Supported by a recovery in oil and gold prices, the first half of 2017 alone saw the economy expand by 7.8% compared to the same period of the previous year, according to Ghana’s 2018 budget statement.

By the end of 2017 the results of efforts to stabilise the economy had started to materialise, as government reported a slowdown in debt growth, better control over spending, and an improvement in fiscal credibility. Indeed, in a statement made by the president in early 2018, the country’s budget deficit was said to have narrowed from 8.9% of GDP in 2016 to 5.6% in 2017, while annual debt-growth fell to 13.6%.

These results line up with the general business sentiment gauged by the 2017 Oxford Business Group Business Barometer: Ghana CEO Survey – 91% of respondents said they had positive or very positive expectations of business conditions in the coming 12 months.

Recovery afoot

On the back of these positive achievements, the IMF forecast GDP growth would reach 8.9% in 2018, making it one of Africa’s fastest-growing economies. This was substantially more optimistic than the expectations of survey participants: only 2% projected GDP growth of 8% or higher.

Short-term expansion is set to be driven not only by heightened activity in the hydrocarbons sector, but also by growth in non-hydrocarbons activities such as agriculture and ICT – in line with government’s economic diversification objectives.

This is a crucial move that most resource-rich nations have taken, with the view of shifting their economic dependence away from hydrocarbons. In the meantime, however, energy markets continue to have a bearing on local growth prospects; some 37% of OBG survey respondents view rising oil prices as the greatest perceived external event that could impact the economy. Other external factors seen as top influencers were regional instability and slowing demand growth in China.

Brighter prospects

Government’s commitment to maintaining its grip on fiscal and monetary discipline should bolster efforts to reduce spending and debt levels.

This commitment comes at a crucial time, as Ghana’s GH¢918m (US$220m) IMF credit deal is scheduled to end this year. The three-year programme, which started in 2015, has aimed to improve fiscal management by containing expenditure and introducing reforms to strengthen public finances.

As a result, the IMF predicted public debt would drop from an estimated 70.5% of GDP at the end of 2017 to 66.1% in 2018 and 55.1% in 2022. It is hoped that such a recovery would allow the country to avoid resorting to similar bailouts in the future.

Confidence is returning, but a number of challenges need to be overcome for investments to resume – and potentially exceed pre-crisis levels. When asked which policies the President Akufo-Addo administration should prioritise to support economic growth, 62% of participants in our survey said improving the business environment should be the main focus.

Looking forward, this indicates that the path toward continued growth will require greater supporting measures for domestic companies. With 70% characterising ease of access to credit as difficult or very difficult, and particularly as local firms reported the greatest difficulty, these will need to be addressed for future development

Commenting on the results in her blog, Souhir Mzali – OBG’s regional editor for Africa, said that enhanced fiscal and monetary discipline, and debt management combined with higher oil and gold prices, had helped to boost growth to 7.9% in 2017 according to figures given by President Akufo-Addo, up from 4% in 2014.

“Short-term expansion is set to be driven not only by heightened activity in the hydrocarbons sector, but also by growth in non-hydrocarbons activities such as agriculture and ICT – in line with government’s economic diversification objectives,” she said.

While noting the economic revival and positive knock-on effect on business confidence, Mzali pointed out that challenges – especially the concerns relating to Ghana’s business environment cited by executives in OBG’s survey – could hinder investment if overlooked.

“Looking forward, this indicates that the path toward continued growth will require greater supporting measures for domestic companies,” she said. “These will need to be addressed for future development.”

Mzali’s in-depth evaluation of the survey’s results can be found on OBG’s Editors’ Blog, titled ‘Next Frontier’. All four of OBG’s regional managing editors use the platform to share their expert analysis of the latest developments taking place across the sectors of the 30+ high-growth markets covered by the company’s research.

The OBG Business Barometer: CEO Survey features in the Group’s extensive portfolio of research tools. The full results of the survey on Ghana will be made available online and in print. Similar studies are also under way in the other markets in which OBG operates.

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