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- GDP (PPP):
- $108.3 billion
- 4.2% growth
- 8.3% 5-year compound annual growth
- $4,129 per capita
- Inflation (CPI):
- FDI Inflow:
With relatively sound institutional and legal frameworks, Ghana has made significant progress in poverty reduction despite slowing economic expansion. Maintaining momentum for reform will be critical to securing improvements in the entrepreneurial framework and achieving more broad-based economic development.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 63.0 (no change)
- Economic Freedom Status: Moderately Free
- Global Ranking: 72nd
- Regional Ranking: 5th in Sub-Saharan Africa
- Notable Successes: Rule of Law and Open Markets
- Concerns: Management of Public Finance and Labor Freedom
- Overall Score Change Since 2012: +2.3
Sluggish economic growth accompanied by high inflation has taken a toll on living standards over the past two years. Poor management of public finance, which resulted in a mounting deficit and growing public debt, has contributed to current economic troubles. Measures to cut government spending and restore the soundness of fiscal policy have been discussed, but uncertainty continues.
Ghana has been a stable democracy since 1992. Following the death of President John Atta Mills in July 2012, Vice President John Dramani Mahama became interim head of state. In December 2012, he was elected president. Ghana is Africa’s second-biggest gold producer (after South Africa) and second-largest cocoa producer. It is also rich in diamonds, manganese ore, bauxite, and oil. Most of its debt was canceled in 2005, but government spending was later allowed to balloon. Coupled with a plunge in oil prices, this led to an economic crisis that forced the government to negotiate a $920 million extended credit facility from the IMF in April 2015. Frequent power outages sparked street protests in 2014 and 2015.
Political corruption persists despite the existence of robust legal and institutional frameworks to combat it, active media coverage, and the government’s willingness to investigate major scandals. The scarcity of resources compromises and delays the judicial process, and poorly paid judges can be tempted by bribes. The process for getting clear title to land is often difficult, complicated, and lengthy.
The top personal income and corporate tax rates are 25 percent. Other taxes include a value-added tax, a national health insurance levy, and a capital gains tax. The overall tax burden equals 12.1 percent of total domestic income. Government spending has fallen to the equivalent of 39.8 percent of GDP. However, the budget remains in deficit, and public debt has reached over 60 percent of total domestic output.
Business start-ups have become less burdensome, taking only seven procedures, but the cost of necessary permits exceeds four times the average annual income. Despite ongoing efforts to modernize the labor code, much of the labor force works in the informal economy. In accordance with its three-year IMF extended credit facility, the government committed to removing all remaining fuel subsidies in 2015.
Ghana’s average tariff rate is 10 percent. Government procurement procedures favor domestic firms. In most cases, foreign investors must have a domestic partner. New foreign investment must be registered with the government. The financial sector has undergone privatization, but banking is undercapitalized, and access to financing remains limited.