Household spending in Africa projected to hit $2.1 trillion by 2025
Household consumption on the African continent is projected to grow by an impressive 3.8% to reach nearly $2.1 trillion per year by 2025.
The projected increment in household consumption is on the back of increasing income levels of African households.
“Africa’s market size and demographic trajectory will increasingly lure investors to cater for the burgeoning consumer market. Albeit starting from a low base, income levels in Africa have already started to rise substantially, with household consumption projected to grow by an impressive 3.8% to reach nearly $2.1 trillion per year by 2025,” states a study by Afrieximbank on the African Continental Free Trade Area [AfCFTA] Agreement and creation of new and more competitive Regional Value Chains [RVCs].
The AfCFTA, the study notes, has the potential facilitate the emergence of more resilient regional supply chains to accelerate industrialization on the continent.
The projection of an increase in household spending proves true as household consumption in Ghana for instance is anticipated to grow to become the fifth (5th) largest in Sub-Saharan Africa (SSA).
The projection is on the back of an anticipated average 4.7 percent growth in household spending between 2021 and 2025.
“We forecast Ghana’s household spending to be the fifth largest in Sub-Saharan Africa in 2021, and to grow by an average 4.7% per year between 2021 and 2025,” noted Fitch Solutions.
Read: AfCFTA to create new and more competitive RVCs – Study
According to the research agency, the strong household spending will result in a robust trade outlook for the country as it expects import of goods to grow by an annual average of 6.7 percent between 2021 and 2025.
“Ghana will benefit from a robust trade outlook, as we forecast goods imports (USD) to grow by an annual average of 6.7% between 2021 and 2025. This strong growth will likely be supported by Ghana’s ambitions to become a gateway to the region’s hinterland and by strong household spending,” stated Fitch Solutions.
Household spending in Ghana to reach Ghs 104 billion
In 2021, household spending according to Fitch Solutions was anticipated to grow by 4.1 percentage points from the previous year’s contraction of 1.1 percent due to the Covid pandemic.
On the back of the expected growth, household spending in Ghana was estimated to be valued at some Ghs 104 billion.
The forecast, which indicated improvement in consumer spending in 2021, Fitch Solutions notes, was in line with the expected 4.8 percent real growth rate of the economy.
“Our forecast for an improvement in consumer spending in Ghana in 2021 is in line with our Country Risk team’s forecast that the Ghanaian economy will grow by a real rate of 4.8% year-on-year over 2021, following growth of just 0.4% year-on-year over 2020. Private consumption will be the main driver of the economic recovery, and contribute 2.7 percentage points to headline growth,” said the research arm of Fitch Ratings.
“Household spending (an estimated 71.6% of Gross Domestic Product in 2020) is likely to have grown at a moderate pace in H121 [half-year 2021] as the easing of social distancing restrictions allowed both formal and informal retail activities to open up, while the gradual normalisation of business activities resulted in improving labour market conditions,” the agency added.
