Ghana: Fitch pegs economy expansion at 3.5% of GDP

In a recent report by Fitch Solutions, Ghana’s economy is poised for a rebound, with growth expected to reach 3.5% in 2024, surpassing the World Bank’s more conservative estimate of 2.9%.

The UK-based firm’s April 2024 Sub-Saharan Africa Macroeconomic Update pointed to clear indicators of economic resurgence, led primarily by robust consumer spending amid moderating inflation.

Mike Kruiniger, Senior Country Risk Analyst at Fitch Solutions, highlighted the country’s recent economic trajectory, stating that 2023 had been a challenging year with GDP growth at a muted 2.9%.

However, the economy showed resilience with a rebound in the last quarter, registering a growth rate of 3.8%. This recovery was primarily fueled by improvements in the agriculture sector and increased activity in the services industry.

Looking ahead to 2024, Fitch Solutions remains cautiously optimistic, forecasting a 3.5% expansion.

Although this is still below Ghana’s pre-pandemic growth trajectory, it marks a significant improvement from the previous year.

Election Year to Boost Government Spending

According to Fitch Solutions, the upcoming election year is expected to further stimulate the economy, with the government likely to ramp up spending to enhance the general well-being of its citizens.

Mr Kruiniger noted the historical trend of increased government expenditure in the lead-up to elections, anticipating a similar trend ahead of the December 2024 polls.

Monetary Policy and Interest Rates

In terms of monetary policy, the Bank of Ghana initiated a monetary easing cycle in January 2024 by reducing its policy rate by 100 basis points. While the rate remained unchanged in March, Mr Kruiniger expects further interest rate cuts to be implemented to stimulate economic activity.

Despite these anticipated reductions, weak credit uptake suggests that businesses may remain cautious, delaying expansion plans in the short term.

In summary, Ghana’s economic recovery is underway, with consumer spending, government expenditure, and monetary policy all contributing to a more optimistic outlook for 2024.