Ghana will end the year 2021 with an overall GDP of between 3.9% and 4.9%, Databank Research has said.

“We expect the increased utilisation of spare production capacity to sustain the recovery in the manufacturing and trade sub-sectors”, the report said, adding: “We, however, view the rising cost of production occasioned by the tax hikes, transport fare hikes, and higher fuel cost as a downside risk to the expansion in manufacturing and trade.”

It noted, however, that the food harvest season in the third quarter of 2021 and the main cocoa season in the fourth quarter of 2021 “should propel agriculture growth in the second half of the year, albeit with some risk from the unfavourable rainfall pattern across the southern sector”.

Ghana’s economy expanded by 3.1% in the first quarter of this year.

It was driven by the following sectors: Construction (14.2%), Manufacturing (6.1%), ICT (22.1%), Livestock (5.5%), Crops and Cocoa (4.9%), Financial and Insurance Services (4.8%) and Transport (3.0%).

“With the trade sub-sector also posting a modest growth of 2.7%, we believe Ghana’s growth pulse is gradually strengthening, albeit with downside risks. The sharp contraction recorded in second-quarter 2020 provides a favourable base effect for a stronger growth print for second-quarter 2021”, Databank Research noted.

Databank Research also noted that contractions in the extractive and hospitality sectors hampered growth for the period.

It said in the extractive sector – mining and quarrying, excluding oil & gas, contracted by 5.3% while the oil & gas sector shrunk by 16.2% in first-quarter 2021 (vs. -3.6% in the first quarter 2020).

This contraction is the 5th consecutive quarter of negative growth within the extractive sector, the report noted, explaining that it reflects the lingering impact of Covid-19 on physical demand and the supply of fuel and metals.

The hospitality industry, the report said, showed signs of recovery as the rate of contraction moderated from -73.0% in second-quarter 2020 to -10.7% in first quarter 2021.

On the rollout of the government’s S100-billion GhanaCares Obaatanpa programme, Databank Research said it is “a catalyst for growth in the short to medium term”.

However, “potential challenges with financing the programme amidst bottlenecks in the vaccination rollout are headwinds to the effectiveness of the interventions”, the report noted.

It also said “aggregate wage growth remains muted so far in 2021, and the tax hikes could exert further downward pressure on demand and general economic activity.”