UPDATE 2-Ghana Q3 2013 GDP hit by mining slump, oil decline

Wed Jan 22, 2014 11:38am EST

Related Topics

* Ghana producer price inflation rose to 15.3 pct in December

* Lower global gold prices affect Ghana production

* Efforts to rein in deficit could squeeze consumers -analysts

By Kwasi Kpodo and Matthew Mpoke Bigg

ACCRA, Jan 22 (Reuters) - Ghana's economic growth slowed in the third quarter of 2013 as mining and oil production slumped, amid signs that a government drive to cut the budget deficit could be hurting consumers.

The slowdown raised questions about whether the West African state would meet its target for 7.4 percent growth in 2013 and reach the 8 percent projected for 2014, analysts said.

Gross domestic product grew just 0.3 percent year-on-year in the third quarter, compared with 1.6 percent in the third quarter of 2012 and 6.1 percent in the second quarter of 2013, the government statistics office said on Wednesday.

Robust GDP growth based on exports of gold, oil and cocoa and a stable democracy are the bedrock of Ghana's reputation as one of the most dynamic countries in sub-Saharan Africa.

Growth became even more important last year, as the government struggled to meet fiscal targets amid a falling currency, rising inflation and a 2013 budget deficit provisionally set at 10.2 percent.

Ghana statistics office said a sharp fall in global gold prices in 2013 has affected production in the sector, which is the biggest single contributor to government revenue.

"Most of the declines came from the mining and quarrying sector, especially the drop in gold prices that heavily affected production," said government statistician Philomena Nyarko.

"We also experienced some down time at the Jubilee field, so that affected overall growth," Nyarko told a news conference, referring to maintenance work at the offshore field operated by Tullow that is Ghana's main producer.

The key sectors making up third-quarter growth were services at 46.3 percent, agriculture at 30.4 percent and industry, 23.3 percent.

Annual producer price inflation rose to 15.3 percent year-on-year in December from a revised 13 percent in November, the statistics office announced also on Wednesday.

CONSUMER SQUEEZE

Analysts also questioned how the slowdown in the mining sector, which had been expected, could have such a dramatic effect on overall growth and whether other sectors might also be struggling.

"The low real GDP growth figure for Q3 comes as a shock, even taking into account lower gold and oil production," Melissa Verreynne, economist at NKC Independent Economists in South Africa, said in an e-mail. "If it was merely due to lower gold and oil production, then it is not so worrying. Oil production should rebound quickly. If, however, non-mining growth was also poor, then that is more concerning."

Ghana's GDP jumped around 14 percent in 2011, the year after the country started producing oil, making it one of the hottest economies in the world and a favourite for emerging-market investors. Oil stoked optimism about a bonanza in a nation that had already benefited in the early 2000s from debt forgiveness.

The third-quarter figures, however, raise the possibility that government efforts to bring down the budget deficit by cutting utility and fuel subsidies are squeezing consumers in a way that is starting to hurt growth.

"Maybe we have a bigger problem than we have been thinking about," said Joe Abbey, executive director of Ghana's Center for Policy Analysis, adding that the government's full year 2013 projection may also have been overly optimistic.

Statistics service officials played down the figure, arguing that third quarter growth was often lower because of seasonal reasons, though they acknowledged that 0.3 percent growth between July and September was the lowest since 2006.

"One of the factors is low consumer demand, which is as a result of government's tight monetary squeeze - the monetary squeeze like the non-payment of contractors," said Asuo Afram, acting head of economic statistics.

FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article