Piracy risks will be elevated in the Gulf of Guinea in 2018, as pirate gangs extend their reach beyond Nigerian waters. Ghana’s economic growth rate will decelerate in the medium term, as the economy becomes more broad-based and the agricultural sector underperforms.
Piracy risks will be elevated in Ghanaian waters throughout 2018, as pirate gangs extend their operational capabilities throughout the Gulf of Guinea and beyond Nigerian waters. Incidents are largely financially motivated, with gangs demanding ransoms or robbing ship cargo and equipment. On 29 March 2018 a South Korean fishing vessel, along with 42 crew members, was seized by pirates off the coast of Ghana’s Volta region. The boat was taken to Togolese waters, before being released 12 hours later, following the Ghanaian navy’s intervention. It is believed that the pirates are still holding 3 South Korean nationals, although it is unclear if a ransom demand has been made.
Ghana remains an aspirational target for Islamist groups. Al-Qaeda in the Islamic Maghreb has achieved operational successes elsewhere in West Africa, targeting Côte D’Ivoire and Burkina Faso’s hospitality industries in coordinated mass casualty active shooter and improvised explosive device attacks. Such an incident cannot be ruled out in Ghana in the medium-term outlook, yet the most probable form of attack would be a low sophistication incident using blades or firearms. In January 2018, 3 Ghanaian returnees from Libya were arrested after they were found with 7 hand grenades and other explosives. One of the individuals was suspected to have links with Islamic State.
Economic growth in Ghana will moderate in the medium-term, as the economy becomes more broad-based. Real GDP growth is forecasted at 7.5% in 2018, slowing to 5.9% by 2019. In the near-term, the oil sector will continue to be a significant driver of growth, with production forecasted to grow by 45% in 2018. However, most major oil projects will be online in the next 12 months, meaning that sector growth will begin to decelerate from 2019. At the same time, strong investment levels will support a robust performance in the non-oil economy. The Bank of Ghana’s loose monetary position will improve credit conditions, enabling the service and manufacturing sectors to grow.
The New Patriotic Party (NPP) government has taken steps to improve Ghana’s fiscal and debt position. Reforms introduced in 2017 will increase the number of businesses operating within the formal economy, enhancing government tax revenues. Alongside income from oil, this will allow the fiscal deficit to fall from 8.5% of GDP in 2017 to 4.0% in 2019. In the context of reduced fiscal deficits, Ghana’s debt burden is manageable at an estimated 68.9% of GDP in September 2017, whilst efforts to extend debt maturity have reduced rollover risk. However, sovereign credit risks remain elevated as the government assumes responsibility for around USD 10 billion in debt held by state-owned energy companies.
As part of its efforts to rationalise government spending, the NPP administration is reviewing contracts signed by the previous government, elevating the risk of contract alterations or cancellations. The risk is exacerbated by a drive to increase local content requirements. In April 2017, the government announced that it had renegotiated the terms of the Millennium Challenge Corporation Power Compact, a US-backed concession agreement for the operation of Ghanaian electricity assets. The NPP increased local equity participation to 51% from the agreed 20%.
The agricultural sector will continue to underperform in 2018, driven by challenging conditions in the cocoa industry. Global cocoa prices fell by 30% in the 12 months to April 2017, and are forecasted to fall by a further 1.6% in 2018. As farmers increasingly switch land use to artisanal gold mining, cocoa production will fall by an estimated 8% in 2018. The sector is also affected by labour shortages, as young farmers increasingly seek opportunities in urban sectors.
** There is currently limited capacity for Ghanaian risks in the market
† Risks in the oil and gas sector will likely be priced at the higher end of this range, due to payment delays since last year
In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Tunisia, Ghana, Belarus and Finland all of which have been the subject of recent enquiries from JLT's client base.
The monthly Risk Outlook is supported by JLT’s proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.
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