Fitch Solutions Upgrades Ghana’s Economic Growth to 4.3%

In a significant update, Fitch Solutions has revised Ghana’s real Gross Domestic Product (GDP) growth forecast for 2024 upwards to 4.3%, from the previously anticipated 3.8%.

The London-based firm also projects a further expansion of the Ghanaian economy by 4.5% in 2025, attributing these positive adjustments to stronger than anticipated economic activities in the upcoming quarters of 2024.

According to Fitch Solutions, the outlook for Ghana’s economic growth in the near term remains robust compared to the previous two years. This optimism is underpinned by several key factors, including a projected decrease in inflation and increased government spending ahead of the December general elections.

While inflation was notably high in the first quarter of 2024, averaging 24.2%, Fitch Solutions expects it to trend downward to 19.5% by the end of the year. This anticipated decline in inflation is largely attributed to statistical base effects.

The report from Fitch Solutions highlights that the combination of slowing inflation and stronger government spending will likely enhance consumer activity and boost domestic demand. This is expected to create a more favorable environment for economic growth as households and businesses feel more confident in their financial stability and purchasing power.

Continuous Recovery

Moreover, the firm predicts a continued recovery in fixed investment throughout 2024. Despite the elevated interest rates resulting from the Bank of Ghana’s aggressive rate hikes between 2021 and 2023, which saw a cumulative increase of 1,550 basis points since mid-2021, there is a positive outlook for corporate investment. Improved business confidence is expected to drive stronger corporate investment, further contributing to economic growth.

The optimism is further supported by recent data published by the Ghana Statistical Service. On June 18, 2024, the agency reported that the country’s real economic growth accelerated to 4.7% year-on-year in the first quarter of 2024, up from 3.8% in the fourth quarter of 2023. This marks the fastest expansion in over two years, driven primarily by solid growth in the industrial sector.

The industrial sector experienced a robust growth rate of 6.8%, largely due to increased output in mining, quarrying, and oil and gas operations. These sectors have been pivotal in bolstering the overall economic performance, reflecting the country’s rich natural resources and strategic investments in these areas.

From an expenditure perspective, the growth was driven by a substantial 13.8% increase in fixed investment and a healthy 11.2% rise in private consumption. These figures indicate that both businesses and consumers are contributing to the economic expansion, with investments in infrastructure and capital goods leading the way alongside a strong consumer market.

Fitch Solutions’ revised forecast and the recent economic data underscore the resilience and potential of the Ghanaian economy. The anticipated reduction in inflation, coupled with strategic government spending and a recovering investment climate, positions Ghana for sustained economic growth in the coming years.

Meanwhile, Fitch Solutions’ upward revision of Ghana’s growth rate to 4.3% for 2024 reflects a positive outlook for the nation’s economic trajectory. The forecast of continued expansion in 2025, bolstered by stronger corporate investments and consumer demand, paints an encouraging picture for Ghana’s economic future.