Banks in Ghana, according to research agency, Fitch Solutions, will suffer considerably this year in areas of loan growth and quality as well as profitability.
In a recent report on the Ghanaian economy with emphasis on the country’s banking sector, Fitch Solutions noted that banks’ client loan growth will ease from 30.2% y-o-y in 2022 to 18.0% in 2023. This is because of the weak macro backdrop, fallout from the domestic debt restructuring and base effects.
Also, banks will be more selective with the sectors they lend to especially as loan quality is expected to deteriorate amid the challenging economic backdrop.
The domestic debt restructuring programme, the research arm of Fitch Ratings noted, will significantly weaken capital levels and weigh on banks’ profitability in 2023
At Fitch Solutions we think that Ghana’s client loan growth will ease from 30.2% y-o-y in 2022 to 18.0% in 2023. This is a result of the challenging macroeconomic backdrop, banks remaining uncertain about the possible fallout from the domestic debt restructuring, as well as base effects from very strong loan growth in 2022 (see chart below).
Whilst our nominal client loans growth forecast will still be in double digits in 2023, skewed by still elevated inflation, our real client loan growth forecast will be much weaker at -7.7% by year-end. On top of inflation, further interest rate hikes, a weakening currency and a slowdown in economic momentum will continue to act as headwinds to loans growth in 2023.