By Papisdaff Abdullah
The latest Economic Complexity Index (ECI) has ranked Ghana’s economy as the 103rd most complex out of 133 countries. This measurement represents a drop by two places by the West African nation in the ranking of the index.
A World Bank report titled, “Ghana Trade Competitiveness Diagnostic – Strengthening Ghana’s Trade Competitiveness in the Context of AfCFTA,” concludes that the drop in ranking by the country is indicative of its economy’s worsening complexity.
According to the report, Ghana’s worsening complexity is driven mainly by increased concentration in few primary commodities, largely dominated by the extractive sector. “Ghana’s exports are less complex than expected for its income level. This underpins the country’s inability to grow to its full potential in the medium term given the country’s factor endowment,” added the World Bank report.
Touching on the country’s merchandise trade over the last decade (2010-2019), the report notes merchandise as a share of total exports declined from 84 percent in 2010 to 62 percent in 2019 in line with the share of imports, which declined from 73 to 44 percent of total imports in 2019.
Ghana’s merchandise trade in non-extractive sectors per the report has declined from 36 percent of GDP in 2010 to 21 percent in 2019. Non-extractive exports have stagnated as a share in GDP as well as in trade value since 2011. The country’s merchandise trade, excluding the extractive sector, has been estimated at below the levels expected of countries with similar levels of economic development over the past decade.
While in nominal terms merchandise trade nearly doubled in value following the rapid expansion of the economy, its contribution to GDP declined from 48.5 percent in 2010 to 39.4 percent in 2019. Exports of goods as a share of GDP remained largely unchanged at between 23.5 percent in 2010 and 23.8 percent in 2019, while imports declined from 25 to 16 percent of GDP in 2019.
The report further says, Ghana’s Export Potential Index shows that its merchandise exports should have been 32 percent higher over the decade. The total gap between Ghana’s observed and predicted exports was, on average, estimated at $3 billion between 2010-2019.
Ghana’s comparators that have also exported below the estimated potential during 2010-2019 were Kenya and Nigeria. These missed exports are indicative of opportunities for export growth, provided frictions can be overcome.
Based on the Export Potential Index, Ghana’s exports to the US should have been 5.2 times higher, suggesting an additional $2 billion of potential exports. Meanwhile, its exports to Germany should have been 2.6 times higher, with $450 million in missed exports, four times higher to Japan ($421 million), almost 6 times higher to Brazil ($345 million), and 8.7 times higher to Canada ($313 million).