Ghana growth to slow on sub-par oil production

JOHANNESBURG (Reuters) - Ghana's once red-hot economic growth is likely to slow this year and cool even further next year on disappointing oil production after a crude-driven boom in 2011, a Reuters poll showed on Monday.

The No. 2 grower of cocoa was one of the world's fastest growing economies last year after pumping oil for the first time at its Jubilee field in November 2010, sending gross domestic product (GDP) soaring by nearly 15 percent.

But that growth rate is expected to nearly halve to 8.2 percent this year, slowing further to 7.0 percent next year. GDP rose 8.7 percent year-on-year in the first quarter of 2012.

An oasis of stability in a region plagued by coups and civil war, Ghana faces a presidential election in December after incumbent John Atta Mills died last week, but analysts saw little impact.

The 2012 expectation for the West African country is in line with a poll taken at the start of the year but next year's expectation is down from 7.4 percent in the last survey.

The Reuters poll for Ghana has a good track record for accuracy. In mid-2010 it predicted 14.7 percent GDP growth for 2011, just 0.3 percentage points short of the actual figure.

"We are concerned about oil output as it falls well short of target," said Nema Ramkhelawan-Bhana, analyst from Rand Merchant Bank in a client note.

The country had originally aimed for output of 250,000 barrels per day by 2013, which would put them among the world's top 50 producers.

But due to delays, production has averaged 80,000 bpd and Africa-focused Tullow Oil is looking to increase production at the Jubilee field up to 90,000 barrels a day by the end of the year.

Still, Ghana's growth is comparable with other African oil giants. Angola's economy is tipped to grow 9.1 percent this year, beating the rate of long time heavyweight Nigeria, seen growing 7.0 percent this year.

Analysts are also worried about a weakening cedi currency due to rising imports for the oil industry.

Inflation has trended upwards, making life a hard grind for locals, even though economic growth is on the rise from the oil production.

The poll forecast inflation will average 9.6 percent this year and 9.3 next. The inflation rate rose for a fourth straight month in June to 9.4 percent from 9.3 percent previously.

The cedi has lost over a third of its value since it began producing oil in November 2010, trading now at around 1.95 per dollar.

Locals also blame the currency weakness on trade with China, as many traders are accumulating actual paper cash in dollars due to the lack of effective transfer channels for the yuan in Ghana.

The central bank has raised interest rates by 250 basis points since February to halt the currency from further weakening but to the detriment of growth.

"The central bank has hiked rates, with concomitant downside implications for growth," Lisa Lewin, head of sub-Saharan research at Business Monitor International.

The government asked parliament to increase its fiscal deficit target in 2012 to 6.7 percent of GDP to finance an 18 percent pay rise offered to public sector workers this year and to reform wage structures for state employees.

This could add to some investor uncertainty and put further pressure on the currency, though analysts have been modest with their deficit forecasts, sticking to 5.7 percent of GDP for this year, and then 4.7 percent next year.

Source: http://news.yahoo.com/ghana-growth-slow-sub-par-oil-production-152006599--finance.html

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