2024 IN REVIEW: Economy beats expectations despite global challenges

Despite prevailing global headwinds, the domestic economy defied expectations, with key indicators surpassing consensus forecasts across multiple quarters.

According to data from the Ghana Statistical Services (GSS), the country achieved an average real GDP (gross domestic product) growth rate of 6.3 percent for the first three quarters of the year, significantly higher than the 2.6 percent recorded in the same period of 2023.

This growth, the statistical body said, was driven by quarterly expansions of 4.8 percent in the first quarter (Q1), seven percent in Q2, and a five-year record high of 7.2 percent in Q3.

The non-oil sector also contributed significantly, with an average growth rate of 6.2 percent, up from 2.6 percent  last year. Quarterly growth figures for the non-oil economy stood at 4.3, 6.6 and 7.7 percent in the first, second and third quarters respectively. This performance positions the country to surpass the revised GDP growth projection of 4 percent under the IMF-supported programme.

Consumer inflation

Inflationary pressures persisted in 2024, with the rate rising to 23 percent in November from 22.1 percent in October, as reported by the GSS.

Despite falling from a mountain top of 54.1 percent at the close of 2022 and 23.2 percent in December of 2023, the metric continued to sway, refusing to fall to the initial optimistic 13 to 17 percent range by the authorities.

Headline inflation, which stood at 20.4 percent in August, climbed steadily due to food price pressures and exchange rate pass-through effects from prior currency depreciation; and it is looking increasingly certain that the December 2024 rate would remain above 20 percent.

The Bank of Ghana (BoG) cut it’s benchmark Monetary Policy rate by 100 basis points (bps) to 29 percent during its January 2024 meetings. This was the first rate cut since 2021, with the central bank attributing the decision for falling inflation.

The metric remained the same for much of the year until another 200 bps cut in September, again, due to inflation dynamics. It was, however, retained at 27 percent in November for the same reason.

Consequently, the average lending rate remained above 30 percent, owing to elevated risk concerns.

The Ghana Reference Rate was pegged at 31.31 percent at the start of the year and dropped slowly, reaching 28.84 percent effective November 6, 2024. It was, however, increased to 29.31 percent for December 2024.

IMF-supported programme

The implementation of the Post-COVID-19 Programme for Economic Growth (PC-PEG) under the IMF has yielded notable successes.

The country secured the release of SDR 269.1 million (US$360million) following the approval of the third review by the IMF Executive Board. This brought total disbursements under the programme to US$1.92billion.

The country met all six quantitative performance criteria and four indicative targets for June 2024, marking a significant milestone. The country also made substantial progress in fiscal consolidation, improving its primary balance from a deficit of 4.3 percent of GDP in 2022 to a surplus of 0.4 percent of GDP by mid-2024.

Gross international reserves rose to US$7.7billion as of October 2024, providing 3.5 months of import cover, compared to US$5.2billion in October 2023. Social intervention programmes also saw enhanced funding, with increases in budgets for the National Health Insurance Scheme, school feeding programmes and the Livelihood Empowerment Against Poverty (LEAP) initiative.

Debt restructuring

Significant milestones were recorded in the nation’s debt restructuring efforts during the year under consideration. Agreements were reached with the Official Creditor Committee under the G20 Common Framework to restructure US$5.1billion in bilateral loans, securing debt service relief of US$2.8billion between 2023 and 2026. Additionally, Eurobond holders agreed to restructure US$13.1billion in debt, resulting in a US$4.7billion cancellation and US$4.4billion in debt service savings.

Consequently, the debt-to-GDP ratio fell from 79.2 percent in September to 74.6 percent in October 2024, resulting in a much-needed reduction in public debt stock. The IMF confirmed that these restructuring efforts align with programme parameters, marking Ghana as a model for swift and successful debt negotiations under the Common Framework.

Energy sector reforms

After years of negotiations, the government reached agreements with Independent Power Producers (IPPs) to restructure legacy arrears and power purchase agreements (PPAs). This initiative is expected to provide fiscal relief and ensure reliable power supply. The restructuring includes amendments to PPAs and master gas supply arrangements between the Electricity Company of Ghana (ECG) and the Ghana National Petroleum Corporation (GNPC).

Banking developments

The industry’s total assets surged by 42.4 percent to reach GH¢367.2bn in the year to October, a marked acceleration from the modest 3.2 percent growth recorded in the previous year.

Private sector credit expansion accelerated markedly to 28.8 percent year-on-year in October, representing a substantial reversal from the previous year’s contraction. Banking sector resilience improved moderately, with capital adequacy ratios strengthening to 11.1 percent, though asset quality deteriorated as the non-performing loan ratio climbed to 22.7 percent. The industry’s outlook remains contingent upon earnings recovery and adherence to recapitalisation requirements. Notably, real credit growth turned positive at 5.5 percent, following the previous year’s significant 31.6 percent decline.

SME support

The government deployed nearly GH¢2.1billion under the SME Growth and Opportunity (GO) programme to support small and medium enterprises (SMEs). The Ghana Exim Bank received GH¢700million to provide subsidised financial assistance, while the Ghana Enterprises Agency (GEA) and the Development Bank Ghana (DBG) allocated GH¢230million and GH¢1.4 billion, respectively, to support high-growth SMEs and MSMEs.

Currency performance

The cedi faced continued pressure in 2024, depreciating by 28 percent  against the US dollar, compared to last year.

This was attributed to strong domestic demand for foreign currency and a stronger dollar globally. This decline contrasted with a 9.78 percent depreciation in the same period in 2023.

The unit has clawed back some gains, following the central banks injection of more than US$800million into the market in November.

Fixed income market

The fixed income market showed mixed performance in 2024. While treasury bills attracted strong investor interest due to attractive yields, the secondary bond market remained below pre-Domestic Debt Exchange Programme (DDEP) levels. Yields on 91, 182 and 364-day treasury bills declined, reflecting reduced inflation and a cumulative 300-basis-point cut in the monetary policy rate.

The secondary market began picking up as government was able to meet it obligations. As of end-November 2024, traded volumes reached 153.52 billion, marking a 87.97 percent increase over the 81.67 billion traded in the corresponding period last year. This corresponded to a value traded of GH¢126.58billion.

On the equities front, the value of shares traded from January to November 2024 amounted to GH¢1.996billion, approximately GH¢ billion, marking a 165.44 percent increase compared to the GH¢752million recorded during the same period in 2023.

This surge was accompanied by a 71.29 percent rise in traded volumes, which reached 952.72 million shares during the period. As a result, the market capitalisation climbed to GH¢108.4billion, significantly higher than the GH¢74.2billion recorded by the end of November 2023.