Economic growth to rise to 4.3%, highest in 2 years

Fitch Solutions, an international rating firm, has significantly revised its economic outlook for Ghana, predicting stronger economic performance in the second half of the year.
It highlighted that slowing inflation, combined with stronger government spending ahead of the December general elections, is expected to bolster consumer activity and boost domestic demand.
Additionally, fixed investment is likely to continue recovering, supported by improved business confidence, which will in turn stimulate stronger corporate investment.
The conclusion of the country’s debt restructuring exercise is expected to also boost recovery.

Revised growth projections
Fitch now anticipates Ghana’s economy to grow by 4.3% in 2024, up from an earlier projection of 3.8%.
The agency also forecasts further economic expansion in 2025, predicting a growth rate of 4.5%.
These updated predictions contrast with the moderate growth Ghana experienced over the past two years, where it posted a growth rate of 3.1% in 2022, declining to 2.9% in 2023.

4.7% GDP growth in first quarter
Overall real Gross Domestic Product (GDP) expanded by 4.7% year-on-year in the first quarter of 2024, outpacing the 3.1% outturn in the same period of 2023 and representing the highest quarterly growth since the second quarter of 2022.
The overall growth recovery was powered by a rebound within the industrial sector, which expanded by 6.8% year-on-year as improved activity in key sub-sectors benefited from favourable base effect.
However, a moderation in growth in the agriculture (4.1% year-on-year) and services sectors (3.3%) indicates the lingering fragility within the real sector which was emphasised by the slower growth rate in non-oil real GDP at 4.2% year-on-year in the first quarter of 2024.

Current economic challenges
Ghana has just completed a complex debt restructuring process and an International Monetary Fund (IMF) programme.
The country is also grappling with issues such as currency depreciation.
Despite these challenges, experts suggest that the IMF’s extended credit facility and successful debt restructuring efforts could spur accelerated growth in the coming year.

Inflation and currency dynamics
As of now, Ghana’s inflation rate stands at 23.1%, with the cedi trading at $15.07.
Fitch Solutions predicts that inflation, which has remained persistent in the first quarter of 2024, will trend downward to 19.5% by the end of the year.
This anticipated decline is primarily attributed to statistical base effects.

Potential constraints on growth
Despite the positive outlook, Fitch cautions that weaker net exports could constrain GDP growth, preventing it from returning to pre-COVID levels of 5.3%.
While a significant recovery in crude oil production, projected at 11%, should support export growth, this is likely to be offset by a sharp decline in cocoa production due to adverse weather conditions.
The rating agency also anticipates a solid recovery in imports driven by growing domestic demand for foreign goods and services, which will impact net exports.

IC Africa predicts 3.4% growth
Similarly, research firm, IC Africa, is upbeat about the growth of the economy in 2024, explaining that the economy would expand by about 3.4%, higher than the 2.9% growth rate in 2023.
According to the firm, the overall growth conditions and the outlook for key sectors, particularly the industrial activities, deepen its expectation for the start of modest economic recovery in 2024.
Its 2024 forecast range for overall real GDP growth is between 2.9% – 3.9%
In a commentary on the first quarter of 2024 GDP figures released by the Ghana Statistical Service, it said the real sector showed green shoots of emerging recovery from the 2023 trough with a stronger overall growth momentum in the first quarter of 2024 consistent with the full year 2024 growth outlook.

Addressing debt and fiscal challenges
Ghana defaulted on most of its $30 billion in external debt in 2022, following the fallout from the COVID-19 pandemic, a surge in inflation, Cedi depreciation, the war in Ukraine, and higher global interest rates.
These factors exacerbated economic strains and made the country’s debt unsustainable.
Consequently, Ghana suspended payments on its external loans in December 2022 as part of a broader debt restructuring effort under the 17th IMF loan-support program to reach debt sustainability.

Future outlook
The completion of the debt restructuring exercise has provided much-needed financial relief and set the stage for a renewed focus on critical infrastructure and development projects.
It is expected that many of the country’s stalled projects will soon resume.
To ensure Ghana’s fiscal and debt sustainability moving forward, sustained implementation of robust economic policies is crucial.
These policies must aim to bolster macroeconomic stability, improve the investor