April 27, 2021/Cordros Report

According to the recently released Q4-20 GDP report by the Ghanaian Statistical Service (GSS), the economy grew by 3.27% y/y in Q4-20 compared with a revised contraction of 3.18% y/y in Q3-20. The sustained growth in the fourth quarter of 2020 was due to (1) stronger expansion in the Agricultural sector (+8.18% y/y vs Q3-20: +4.89% y/y) and (2) rebound in the services sector (+4.65% y/y vs Q3-20: -3.35% y/y) amidst the easing of COVID-19 restrictions which took effect in June 2020. The Q4-20 GDP outturn was in line with Cordros’ estimate of 3.28% y/y. However, due to the revisions to the Q1-20 (+6.79% y/y vs previous: +4.91% y/y), Q2-20 (-5.92% y/y vs previous: -3.21% y/y) and Q3-20 (-3.18% y/y vs previous: -1.09% y/y) growth numbers, the 2020FY (+0.29% vs 2019FY: +6.64%) print was 71bps below our estimate of 1.00% y/y.

Agricultural Output Maintains Momentum

Boosted by crops and cocoa production (75.0% of total agriculture output), the agricultural sector grew by 8.18% y/y in Q4-20 (Q3-20: 4.89% y/y) – the highest since Q4-19 when the sector posted a growth of 10.23% y/y, which was the highest since the GSS started keeping a record of the current data series. We think the USD400.00/tonne Living Income Differential (LID) implemented at the beginning of Q4-20 must have influenced cocoa producers to ramp up supplies to earn more as the LID is added to the sale price of Cocoa beans.

Gains from Re-opening puts Service Sector Back in Shape

After posting two consecutive quarters of decline in Q2-20 (-8.29% y/y) and Q3-20 (-3.35% y/y), the services sector rebounded in Q4-20 (4.65%). We believe the strong recovery in the sector reflects the (1) continued gains from the relaxation of COVID-19 induced containment measures, (2) increase in Telecoms subscribers and (3) production of medical and pharmaceutical products in response to the pandemic.

Recovery in Manufacturing Sector Moderates Decline in Industrial GDP

Unlike the Agricultural and Services sectors, the Industrial GDP (32.6% of total GDP) declined in Q4-20 (-0.36% y/y) albeit substantially lower when compared with Q2-20 (-7.82% y/y) and Q3-20 (-7.16% y/y). The mild contraction in the fourth quarter came on the heels of a sharp recovery in the manufacturing sector (+14.20% y/y vs Q3-20: -7.36% y/y) – the highest since Q1-18: (+16.61% y/y).

Outlook – Positive Growth Trajectory to be Sustained in Q1-21

Having factored in the upside and downside risks, we have revised our estimates for Q1-21 and 2021FY growth upwards to 4.30% y/y (Previously: 2.73% y/y) and 4.85% y/y (Previously: 4.56% y/y), respectively.

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