Despite the surge in Gross Domestic Product (GDP) from 6.6 percent in 2016 to 9 percent as at the 2nd quarter of this year, challenges with power stability and low commodity prices on the world market could derail positive results, RMB Research has noted in its latest outlook on the Ghanaian economy.

The South African-based research firm pointed out that the extended low oil and cocoa prices could reduce government’s planned expenditure.

Cocoa prices on the world market has seen consistent decline over the past year. Bloomberg data show that cocoa beans were trading at US$2,825 per metric tonne in the last week of September 2016, but has dropped by 28.7 percent to US$2,015 as at the last week of September, 2017.

The world market price of crude oil, despite seeing marginal growth from US$47 to US$52 per barrel in September 2017, is relatively unstable.

“Although the government fast-tracked the provision of 850MW of power by 2018 and placed austerity tariffs on electricity, the sector will continue to be reliant on electricity imports due to underperforming thermal power plants. Hydropower generation will remain subdued in order to conserve water at the reservoirs,” RMB’s research said.

RMB however lauded the government’s openness to raising the level of private sector investment in the energy sector, a development that has led to the approval of a 400MW liquid petroleum gas-fired power plant.

“Moreover, the World Bank has approved a US$700million loan for the Sankofa gas fields to improve Ghana's gas supply for the purposes of combatting the electricity shortage,” the report added.

The 9 percent year on year growth in the second quarter has taken the first half growth of 2017 to an average of 7.8 percent year on year. Seasonally adjusted GDP rose to 2 percent year on year from 1.5percent in first quarter 2017.

The data from the GSS noted that the industry sector, which accounts for 26.5 percent of GDP, expanded by 19.3 percent - driven by the local oil sector, which rose 188 percent within the mining and quarrying sub-sector on the back of higher production.

“The tide has turned, as evidenced by the latest quarterly numbers, and purchasing output recording its highest increase in August. These most recent figures support our view for an average growth rate of 6 percent for 2017 and 2018 from a revised 3.7 percent in 2016,” RMB added.

RMB is of the view that a stable exchange rate, a reduction in inflation - and consequently a cut in policy rates - and a narrowing of the fiscal and current account deficits have laid the foundation for sustainable economic development.

This, it added, has led to an improved investor sentiment that made Ghana become the fourth-largest recipient of Foreign Direct Investment (FDI) in Africa in 2016, which increased by 9.2 percent to US$3.5bn from the previous year.

“Investor demand for longer-dated Ghana bonds remains strong, with the 2026 bonds currently at the 18.10/17.60 percent levels in the secondary market.

“We expect this narrative to continue in the coming sessions – especially as offshore investors hunt for duration on GH¢ debt. Interestingly, the 2026 (no guarantee) bond has slightly outperformed the 2030 (guaranteed) in the past two months, implying that the market is comfortable with Ghana’s risk profile,” RMB added.