African Lions: Is Ghana A Bellwether?
BMI View: Ghana's current economic malaise could be replicated in other 'African Lions' over the coming months and years. We will be watching out for a number of red flags for growth: surging imports, deterioration of the government budget and negative shifts in local sentiment. At present, Mozambique, Tanzania and Zambia are most at risk of economic instability.
Ghana provides a stark example of the challenges that can befall relatively small economies when there is a surge in foreign investment coupled with a consumer boom and inadequate policy monitoring. Since 2011, a 'perfect storm' has been brewing, involving a sharp widening of the current account deficit and fiscal deficit, rising debt levels and severe currency depreciation (see 'Will Ghana Seek External Assistance?', April 22). Other countries could follow suit over the coming years, albeit with slightly different dynamics.
Although our core scenario is for all of our ten 'African Lions' (top ten growth markets) to post economic growth in excess of 6.0% annually on average over the coming ten years, it will not be plain sailing for these economies. Rather, we anticipate a bumpy ride, characterised in some cases by severe structural macroeconomic imbalances, high inflation and currency depreciation.
|Strong Headline Growth Belies Structural Weaknesses|
|Africa - Real GDP Growth Forecasts, % And Percentage Point Contribution of Components, 2014-2023 annual averages|