Ghana economy performs very poorly on WEF’s Financial Development Index 2011

…ranks 58 out of 60 economies

Ghana’s economy is projected to accelerate at least 13.5% in 2011 making it the fastest growing economy in the world, according to the International Monetary Fund (IMF).

According to the IMF, Ghana’s economy has “strongly recovered.”

The African Economic Outlook (AEO), a joint product of the African Development Bank, the OECD Development Centre, the United Nations Economic Commission for Africa (UNECA) and the United Nations Development Programme (UNDP) projects that the country’s economic growth has remained strong with real GDP growth reaching an estimated 5.9% in 2010 compared to 4.7% in 2009 with projected growth of 12% in 2011.

The government of Ghana through the Ministry of Finance and Economic Planning on September 15, 2011 issued a statement saying the economy will grow 14.1% this year.

According to the World Bank, Ghana’s economy may expand by 20% this year as the start of oil production for export, along with high prices for cocoa and gold, boost revenue.

The Standard Bank, mother-company of Stanbic Bank Ghana also projected a 16.3% growth for Ghana’s economy in 2011.

But the Financial Development Index 2011 published by the World Economic Forum (WEF) December 12, 2011 ranks Ghana 58 out of 60 of the world’s leading financial systems and capital markets with a score of 2.5 points on the scale of 1-7, painting a negative picture of the country’s economy.

Ghana, Tanzania and Tunisia were three countries added to the index raising the total number of economies covered in the Index from 57 to 60 since its first edition in 2008. It provides a platform for CEOs and senior executives to collaborate with their peers and an extended community of senior leaders from the public sector, academics, and experts from civil society to tackle key issues of concern to the global community.

The report defines financial development as the factors, policies, and institutions that lead to effective financial intermediation and markets, as well as deep and broad access to capital and financial services. In accordance with this definition, measures of financial development are captured across the seven pillars of the index. The seven pillars are Institutional environment; Business environment; Financial stability; Banking financial services; Non-banking financial services; Financial markets and Financial access.

On the institutional environment pillar which encompasses the financial sector liberalization, corporate governance, legal and regulatory issues, and contract enforcement, Ghana placed 38 with 3.8 points.

The country ranked 47 securing 3.8 points on the business environment pillar. The pillar considers human capital, taxes, infrastructure, and costs of doing business. Ghana scored 5 out of 7 points with the cost of doing business sub pillar, placing 32 out of the 60 economies.

The financial stability pillar which captures the risk of currency crises, systemic banking crises, and sovereign debt crises saw Ghana at the last position (60th). This was due to non-availability of data on the two of the three sub pillars namely the currency stability and the banking system stability. The risk of sovereign debt crisis sub pillar ranked the country 56 with 2.5 points.

The banking financial services pillar puts Ghana at the 44th position with 3.1 points. The pillar measures the size, efficiency and financial disclosure of the banking industry.

The non-banking financial services including initial public offering (IPO), merger and acquisition activity, insurance and securitization saw Ghana ranked 57 with a low 1.2 point. Data on insurance and securitization was unavailable.

On the financial markets pillar of Ghana, the country was positioned at 59th scoring 1.0 point. It contains foreign exchange and derivative markets, and equity and bond market development.

The last pillar – financial access – evaluates commercial and retail access, Ghana placed 54 with 2.4 points.

On the overall index, Hong Kong SAR took the top spot from the United States which placed 2nd.

Africa’s most populous country Nigeria was the lowest ranked (60th) country on the index with 2.44 points even though it improved upon the 2010 edition by 0.03%.

By Ekow Quandzie