Ghana’s economy is expected to expand by additional 0.5% of Gross Domestic Product (GDP) annually over the next 10 years due to the implementation of the African Continental Free Trade Agreement. According to the World Bank report on Trade Competitiveness, this is very significant and should motivate the government to follow up with the outstanding negotiations and implementation of the AfCFTA protocols.
According to the report, the recent entry into force of the African Continental Free Trade Area (AfCFTA) offers significant opportunities to Ghana to expand and diversify exports.
Again, it can improve productivity through economies of scale and attract more foreign direct investments (FDIs) inflows.
“The impressive performance of Ghana’s services trade over the last decade, is a good indicator of Ghana’s potential for achieving its diversified trade agenda in the medium to long term. This is because improved services trade, particularly in dynamic and innovative subsectors, by itself contributes to structural transformation, trade diversification and export growth.”
“Besides, improved performance of services sector is a critical input toward ensuring efficiency of the manufacturing sector and capacity for upgrading the country’s participation in Global Value Chains”, it pointed out.
The report also expressed satisfaction that Ghana has strengthened its comparative advantage as a regional business hub, which can be leveraged for more diversified trade and economic transformation, therefore it continues to make progress in terms of transport logistics; expansion and improvement of critical infrastructure such as the seaports and air transport services.
It however cautioned that the vulnerability of country’s economy to external shocks was evidenced by the collapse in crude oil prices during the Covid-19 pandemic, despite the economy benefiting significantly when primary commodity prices increased.
Extractive sector supported economy in difficult times
According to the World Bank, Ghana’s external trade grew alongside a strong pre-COVID economy, thanks to its extractive sector.
“Ghana’s economy grew by annual average of 6.4% of GDP over the period 2010-2019, underpinned by a strong external trade performance. However, the level of concentration of Ghana’s merchandise export base has increased over the past decade”.
In 2019, exports of extractives constituted more than 70% of total exports compared to close to 60% in 2010.
The report focused on Ghana’s export performance in goods and services and examines the possibility of leveraging trade policies to accelerate export diversification and economic transformation.