September 23, 2021/Cordros Report
The recently released Q2-21 GDP report by the Ghanaian Statistical Service (GSS) showed that Ghana’s economy grew by 3.85% y/y in Q2-21 compared with 3.13% y/y growth recorded in Q1-21. The growth was driven by the Agriculture (+5.55% y/y vs Q1-21: +4.34% y/y) and Services (+10.97% y/y vs Q1-21: +4.01% y/y) sectors, underpinned by favourable weather conditions and normalisation of activities. Nonetheless, we highlight that the economy is yet to recoup pandemic losses as the growth was 2.07ppts lower than the decline recorded in the corresponding period of 2020.
The Agriculture sector (19.3% of GDP) continued to maintain its resilience as it grew by 5.55% y/y compared with 4.34% y/y and 8.18% y/y in Q1-21 and Q4-20, respectively. We think the USD400.00/tonne Living Income Differential (LID) implemented at the beginning of Q4-20 must have influenced cocoa producers to continue to ramp up supplies to earn more as the LID is added to the sales price of Cocoa beans.
Base effects propelled the growth of the Service sector (+10.97% y/y vs Q1-21: +4.01% y/y) as it recorded its highest quarterly growth since Q1-20 (+11.57% y/y). We believe the strong growth in the sector reflects the combined impact of (1) normalisation of economic activities, (2) favourable base effect from the prior year and (3) increase in Telecoms subscribers. Consequently, growth was broad-based across all the sub-sectors under the Service sector.
The Industrial sector (-4.31% y/y vs Q1-21: +1.34% y/y) resumed decline after the growth recorded in the first quarter of the year. The decrease was primarily due to the Mining sub-sector (-18.93% y/y vs Q1-21: -11.17% y/y), which recorded its sixth consecutive quarter of contraction and the largest since Q2-16 (-24.62% y/y). Besides, the Construction sub-sector’s growth momentum (+2.44% y/y vs Q1-21: +14.25% y/y) slowed due to a decline in the government’s capital spending during the review period.
Outlook – Positive Growth Trajectory to be Sustained in Q3-21
Having factored in the upside and downside risks, we forecast GDP to grow by 4.59% y/y in Q3-21. Overall, we revise our 2021E growth projection downwards to 3.72% y/y (previous estimate: 4.85% y/y) informed by the lower-than-expected performance in Q2-21.
