Economic growth slows to over one-year low in Q4

GDP growth shifts into lower gear in Q4: The Ghanaian economy tapped on the brakes in the final three months of 2024, with GDP growth halving to 3.6% from the prior three months’ 7.2% increase. Accordingly, the economy expanded 5.7% overall in 2024 (2023: +3.1%), the best reading since 2019. On a seasonally adjusted quarter-on-quarter basis, economic growth moderated to 0.9% in Q4 from the previous period's 1.7% growth. Both the annual and quarterly increases were the softest since Q3 2023.

Total investment, cocoa and exports cause deceleration: The annual slowdown chiefly reflected moderations in growth of total investment and exports. Domestically, total investment growth more than halved to 10.8% in Q4, following a 21.9% rise in the prior quarter. Similarly, government spending growth decelerated to 2.3% in Q4 (Q3: +3.4% yoy). More positively, household spending growth accelerated to 3.9% in the final quarter of 2024, which was above the third quarter's 3.5% expansion. Turning to the external sector, exports of goods and services rose 2.7% on an annual basis in the final quarter, which was below the third quarter's 14.7% expansion; that said, imports of goods and services growth slowed to 7.0% in Q4 (Q3: +11.8% yoy). Looking at sectoral data, the slowdown in the economy was due to growth in the industrial sector nearly halting, and cocoa output contracting for the sixth consecutive quarter; the downturn in the latter was driven by unfavorable weather, crop disease and smuggling of beans.

Hard work lies ahead: Following a surprisingly robust performance in 2024, the economy is projected to grow at a softer pace in 2025, before gaining steam through 2028. In 2025, the deceleration should be broad-based. Above-target inflation will likely restrain private consumption growth as savings dwindle, and government spending should decelerate on fiscal consolidation. That said, recently concluded debt restructuring deals, the implementation of economic reforms and inflows of IMF funds will strengthen economic fundamentals ahead. Extreme weather events plus protracted turmoil in the all-important cocoa and gold industries pose downside risks.

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