Fitch Solutions adjusts Ghana’s 2024 GDP growth forecast from 2.7% to 3.7%

December 28, 2023
Fitch Solutions
Fitch Solutions

Solutions, the UK-based financial forecasting firm, has adjusted its outlook for Ghana's Gross Domestic Product (GDP) growth rate in 2024, revising it to 3.5% from the earlier projection of 3.7%.

While this marks an improvement from the anticipated 2.7% growth rate in 2023, it still falls below the pre- pandemic average of 5.0%.

The revision comes with an optimistic forecast, suggesting that the Ghanaian economy is poised to enter a recovery phase in 2024, primarily driven by a resurgence in private consumption.

Fitch Solutions stated, “We expect that the Ghanaian economy will enter a recovery phase in 2024, driven by stronger private consumption.”

The firm attributed the dip in growth to soaring consumer price inflation over 2022-2023, resulting from a significant sell-off of the Ghanaian . This depreciation weakened the purchasing power of households, exerting downward pressure on domestic consumption.

However, Fitch Solutions anticipates a moderation in price growth, projecting an average of 40.3% in 2023 to decrease to 17.8% in 2024. This shift is expected due to statistical base effects and more favourable exchange rate dynamics.

Focusing on Ghana's external debt restructuring under the G20 Common Framework, Fitch Solutions expressed confidence in the government's progress in the coming quarters. The expectation is that a more expansionary fiscal stance will inject additional demand into the economy.

Despite the positive outlook for 2024, Fitch Solutions anticipates that growth in the final quarter of 2023 will remain subdued. The Ghanaian Purchasing Managers' Index (PMI) for October and November indicated only a slight expansion in the manufacturing sector, with a value of 51.1 (PMI values above 50 represent an expansion).

Both consumer and business confidence remained low entering the fourth quarter of 2023, signalling that a substantial recovery in domestic demand is unlikely by the end of the year.

Highlighting the economic slowdown, data revealed a sharp deceleration in year-on-year economic growth to 2.0% in the third quarter of 2023, down from 3.2% in the preceding quarter.

This downturn, attributed to a contraction in the secondary sector, particularly the oil and gas industry, and weakened conditions in the services industry, marked the weakest performance since the third quarter of 2020 during the initial impact of the COVID-19 pandemic.

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