Macroeconomic conditions lower trade attractiveness – Trade Barometer

The prevailing domestic macroeconomic conditions have been ranked as average in comparison to other countries by the latest Stanbic Bank Africa Trade Barometer (SB ATB), with moderate impact on the economy’s trade attractiveness.

Ghana’s ranking in the overall SB ATB declined from position 2 in September 2022 to position 5. This shift was partially due to a drop in the SB Quantitative Trade Barometer (QTB) ranking from position 2 to position 5. Although the country improved from position 10 to position 7 in the SB STB ranking, this was not enough to maintain its overall standing relative to other markets.

One notable aspect of Ghana’s trade attractiveness is its merchandise trade, accounting for 44 percent of GDP in 2022. This percentage is relatively high compared to other markets; however, the country faces challenges such as high interest rates and inflation, primarily driven by global factors which are negatively affecting its overall tradability and attractiveness.

On the business confidence front, only 25 percent are optimistic about the medium-term prospects of the economy. This places Ghana with a business confidence score of 47 – below the SB ATB average of 58. This pessimism may be attributed to declining macroeconomic growth forecasts, with real GDP expected to drop to 1.6 percent in 2023 from 3.2 percent in 2022 due to fiscal austerity measures and inflationary pressures.

Despite these challenges, surveyed businesses remain confident in their individual prospects – with 86 percent expecting increased revenues over the next three years. However, views on government’s role in supporting cross-border trade activities are mixed. While some projects aimed at improving infrastructure and supporting entrepreneurs have gained traction, negative sentiments persist due to inflation and foreign currency constraints.

Meanwhile, infrastructure quality in the country has improved relative to other SB STB markets, moving from position 7 in September 2022 to 5 in May 2023. This improvement reflects government initiatives to modernise and expand infrastructure, including expansions at Tema Port. However, electricity supply issues continue to hinder business operations.

Similarly, the economy’s trade openness index increased slightly from 48 in September 2022 to 52, maintaining its 7th position among SB ATB markets. The majority of surveyed importers source their inputs from China, while exporters primarily target neighbouring West African countries. However, import/export-related taxes remain an obstacle to business growth.

Access to credit is perceived as more challenging for smaller businesses, aligning with rising monetary policy rates post-COVID-19. Businesses are coping by utilising credit arrangements with suppliers, the report said.

Barriers like infrastructure challenges, political instability, high tariffs and complex Customs procedures negatively affect Ghanaian businesses’ ease of trading with other African countries. The percentage of businesses which find trade with the rest of Africa difficult increased significantly, from 28 percent in September 2022 to 44 percent in May 2023 – pushing Ghana to 9th position in this thematic category.

Ghana, a signatory to the African Continental Free Trade Area (AfCFTA), has seen improved awareness of AfCFTA among surveyed businesses – rising from 35 percent in September 2022 to 53 percent in May 2023. Government efforts and creation of the National AfCFTA Coordination Office have contributed to this improvement.

The nation’s trade landscape faces challenges, particularly in infrastructure and economic stability.