Long-Run Growth in Ghana : Determinants and Prospects

Ghana's economic growth picked up in the early 2000s and has been exceptionally strong over the past few years, with price booms of its main commodity exports, gold and cocoa, and the initiation of commercial oil production in 2011. This paper...

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Main Authors:	Herrera, Santiago, Aykut, Dilek
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	growth strategy oil production natural resources Economic growth
Online Access:	http://documents.worldbank.org/curated/en/2014/11/20389661/long-run-growth-ghana-determinants-prospects http://hdl.handle.net/10986/20650

id	okr-10986-20650
recordtype	oai_dc
spelling	okr-10986-206502021-04-23T14:03:59Z Long-Run Growth in Ghana : Determinants and Prospects Herrera, Santiago Aykut, Dilek growth strategy oil production natural resources Economic growth Ghana's economic growth picked up in the early 2000s and has been exceptionally strong over the past few years, with price booms of its main commodity exports, gold and cocoa, and the initiation of commercial oil production in 2011. This paper examines recent econometric evidence on Ghana's long-term growth and evaluates its sustainability. The empirical evidence surveyed finds that Ghana's main growth drivers were investment, oil, and mineral rents, while government consumption acted as a growth retardant. Based on various scenarios for its determinants, per capita GDP growth rates are predicted to be between 3.5 and 4.5 percent for 2014-34. Nevertheless, the predictions are subject to considerable uncertainty associated with the expected trends and volatility of the drivers of growth, particularly to sustaining investment levels and external factors such as commodity prices and international capital flows. A growth decomposition exercise shows that Ghana's past growth was led by capital accumulation, which will be difficult to sustain given the high current account deficits and the volatility of capital flows. Hence, a switch toward a productivity-based growth strategy, instead of the investment-led growth strategy of the past, is the only viable alternative to sustain the recent high growth rates. For that, Ghana needs focus on policies that enhance government effectiveness and public spending efficiency. To mitigate the risk of falling into the so-called growth traps like many other countries, Ghana must resolve its macroeconomic imbalances and resume the institutional reform to enhance the quality of institutions and make growth more inclusive. 2014-12-03T23:14:54Z 2014-12-03T23:14:54Z 2014-11 http://documents.worldbank.org/curated/en/2014/11/20389661/long-run-growth-ghana-determinants-prospects http://hdl.handle.net/10986/20650 English en_US Policy Research Working Paper;No. 7115 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Africa Ghana
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	growth strategy oil production natural resources Economic growth
spellingShingle	growth strategy oil production natural resources Economic growth Herrera, Santiago Aykut, Dilek Long-Run Growth in Ghana : Determinants and Prospects
geographic_facet	Africa Ghana
relation	Policy Research Working Paper;No. 7115
description	Ghana's economic growth picked up in the early 2000s and has been exceptionally strong over the past few years, with price booms of its main commodity exports, gold and cocoa, and the initiation of commercial oil production in 2011. This paper examines recent econometric evidence on Ghana's long-term growth and evaluates its sustainability. The empirical evidence surveyed finds that Ghana's main growth drivers were investment, oil, and mineral rents, while government consumption acted as a growth retardant. Based on various scenarios for its determinants, per capita GDP growth rates are predicted to be between 3.5 and 4.5 percent for 2014-34. Nevertheless, the predictions are subject to considerable uncertainty associated with the expected trends and volatility of the drivers of growth, particularly to sustaining investment levels and external factors such as commodity prices and international capital flows. A growth decomposition exercise shows that Ghana's past growth was led by capital accumulation, which will be difficult to sustain given the high current account deficits and the volatility of capital flows. Hence, a switch toward a productivity-based growth strategy, instead of the investment-led growth strategy of the past, is the only viable alternative to sustain the recent high growth rates. For that, Ghana needs focus on policies that enhance government effectiveness and public spending efficiency. To mitigate the risk of falling into the so-called growth traps like many other countries, Ghana must resolve its macroeconomic imbalances and resume the institutional reform to enhance the quality of institutions and make growth more inclusive.
format	Publications & Research :: Policy Research Working Paper
author	Herrera, Santiago Aykut, Dilek
author_facet	Herrera, Santiago Aykut, Dilek
author_sort	Herrera, Santiago
title	Long-Run Growth in Ghana : Determinants and Prospects
title_short	Long-Run Growth in Ghana : Determinants and Prospects
title_full	Long-Run Growth in Ghana : Determinants and Prospects
title_fullStr	Long-Run Growth in Ghana : Determinants and Prospects
title_full_unstemmed	Long-Run Growth in Ghana : Determinants and Prospects
title_sort	long-run growth in ghana : determinants and prospects
publisher	World Bank Group, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2014/11/20389661/long-run-growth-ghana-determinants-prospects http://hdl.handle.net/10986/20650
_version_	1764446950081429504

Long-Run Growth in Ghana : Determinants and Prospects

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