Ghana's economy benefits from increasing stability.

In the May 2007 edition of its African Economic Outlook (AEO), the Organization for Economic Cooperation and Development (OECD) says the following about Ghana: "The economy seems to be on the cusp of becoming an emerging market."

Unquestionably, as the graph above vividly shows, Ghana has made significant progress in recent years in terms of its macroeconomic fundamentals. The graph shows inflation wildly out of control for most of the 10 year period. But there is a clear, sharp downward trend in the annual percentage increase of inflation.

The graph also shows a slight upward trend in the country's per capita income for the period.

Although the OECD does not back away from discussing Ghana's economic weaknesses, it is difficult to assign much credence to the idea that the country is approaching anything like emerging market status.

One disquieting element that the OECD appears to overlook is that Ghana's taming of inflation has not been in place for very long. The above graph shows a spike in inflationary growth in 2005. And International Monetary Fund (IMF) October 2007 estimates show that inflation will just barely drop out of double digit growth (to 9.4 percent) for 2007. The IMF says that growth of Ghana's rate of inflation will decline to 8.8 percent in 2008.

But as solid an achievement as this may be, it is hardly a comforting track record.

Also, while per capita income is growing, the growth is anemic--barely changing in the decade period of the page 1 graph.

The OECD says--correctly in our estimation--that Ghana's stable political climate is a point in favor of economic expansion. But the AEO appears to taint that optimistic conclusion with the following statement. "The political situation could be improved further by tackling growing perceptions of corruption in public life."

Corruption is nearly universally shown to be a major impediment to achieving true market status.

The OECD mentions that industrial growth improved significantly in 2006--another quite positive development--but growth in the industrial sector, and hence higher paying jobs and improved consumer spending, is likely to be truncated by problems in the production in electricity at the Akosombo Dam on the Volta River.

Low water levels are the problem.

Reporting on August 3, 2007, the Integrated Regional Information Networks (IRIN) of the United Nations says, "Ghana is undergoing its worst power crisis since 1998. People go without electricity for at least 12 hours every other day, and, with insufficient rain to keep its hydropower stations functioning, the situation is likely to deteriorate, affecting individual livelihoods and the economy as a whole."

Another positive development for the Ghanian economy is the reform of the country's vaunted cocoa sector. The OECD points out that Ghana was the world's leading producer of cocoa in the decades of the sixties and seventies. But in recent years this segment of Ghana's important agricultural sector fell to a third place rank in world production.

The Ghanian government took steps to provide price supports as well as introducing modern farming methods, all with dramatically positive results.

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