Economic Activity Rebounds with 1.6% CIEA Growth, Signaling Recovery from 2023 Contraction
Ghana’s economy is showing signs of recovery, as indicated by the latest data from the Bank of Ghana’s 120th Monetary Policy Committee (MPC) press briefing. According to the central bank, high-frequency real sector indicators point to a sustained pickup in economic activity, with the real Composite Index of Economic Activity (CIEA) recording an annual growth of 1.6% in July 2024. This marks a sharp turnaround from the 2.8% contraction seen in the same period last year.
The rebound in economic activity has been underpinned by a number of key sectors. Construction activities, household and firm consumption, and increased exports and imports have all contributed to the upward trajectory. Additionally, the tourism sector has seen a boost in arrivals, adding momentum to the recovery.
The latest surveys conducted in August 2024 paint a similarly optimistic picture, with both consumer and business confidence rebounding. Consumer confidence has been bolstered by easing inflationary pressures, leading to a more favorable outlook for future economic conditions. Inflation in Ghana has been a significant concern in recent years, but the central bank’s tightening measures appear to be yielding results, fostering greater optimism among consumers.
On the business front, confidence has firmed up as companies have met their short-term targets and expressed positive sentiments about both their own prospects and the broader industry outlook. This is a marked improvement from the caution that has pervaded much of the corporate sector amid Ghana’s recent macroeconomic turbulence.
The Purchasing Managers’ Index (PMI), a key barometer of private sector activity, also points to an improving economic landscape. The PMI rose to 51.1 in August 2024, up from 50.1 in the previous month, indicating a modest but steady expansion in business activity. A PMI above 50 generally signals growth in the private sector, and this upward movement reflects the broader improvement in sentiment.
The central bank’s findings come as Ghana navigates a complex economic environment, marked by high debt levels and external vulnerabilities. The country has been grappling with inflationary pressures, exacerbated by global supply chain disruptions and the aftershocks of the COVID-19 pandemic. However, recent macroeconomic data suggests that efforts to stabilize the economy are beginning to bear fruit.
Governor of the Bank of Ghana, Dr. Ernest Addison, noted that while the economic outlook is improving, caution remains necessary. “The economy is on a recovery path, but we must remain vigilant in addressing underlying vulnerabilities,” Addison said during the press briefing. The central bank has kept its policy rate at a record high of 30%, reflecting ongoing concerns over inflation and the need to manage the country’s fiscal imbalances.
The improved consumer and business confidence comes as a welcome development for the government, which has been implementing a series of reforms aimed at stabilizing the economy. The International Monetary Fund (IMF) recently approved a $3 billion support package for Ghana, providing much-needed liquidity to support ongoing reforms and alleviate some of the country’s debt burden.
While the growth in the CIEA and the uptick in confidence are positive signs, challenges remain. Ghana’s fiscal position is still precarious, with high levels of public debt and a reliance on external financing. Moreover, the global economic environment remains uncertain, with rising interest rates in advanced economies posing a risk to emerging markets like Ghana.
Looking ahead, much will depend on the government’s ability to sustain the recovery and implement structural reforms that can drive long-term growth. The central bank is expected to maintain a cautious stance, balancing the need to control inflation with supporting the fragile economic recovery.
