The economy is beginning to recover, with both consumer and business confidence increasing, according to recent surveys by the Bank of Ghana (BoG).

The August 2024 reports indicate significant improvement in overall sentiment, driven by lower inflation, robust GDP growth, and companies meeting their short-term targets.

This boost in confidence is mainly due to continuous improvements in the macroeconomic landscape.

Speaking at a press briefing after the 120th Monetary Policy Committee (MPC) meeting, Dr. Ernest Addison, Governor of the Bank of Ghana, emphasized the key drivers behind this positive outlook.

“Consumer confidence improved on account of easing inflationary pressures, which has led to optimism about future economic conditions,” Dr. Addison noted.

He further noted that business confidence has risen as companies achieved their short-term goals and expressed optimism about their future prospects, driven by improving economic conditions.

This surge in confidence aligns with stronger-than-expected economic growth. Provisional data from the Ghana Statistical Service for Q2 2024 showed real GDP growth at 6.9%, a significant jump from 2.5% in the same period of 2023.

Non-oil GDP growth was particularly notable, reaching 7%, compared to 3.1% a year ago.

Leading the recovery was the industry sector, which grew by 9.3%, rebounding from a 2.6% contraction last year. The services and agriculture sectors also showed strong growth, recording 5.8% and 5.4% respectively.

This economic recovery is further supported by key indicators suggesting sustained improvement in activity. The real Composite Index of Economic Activity (CIEA), a central bank tool for tracking short-term economic trends, grew by 1.6% in July 2024, a sharp reversal from the 2.8% contraction seen in the same period in 2023. Key drivers of this positive trend included increased construction, rising household consumption, and a boost in both exports and imports.

Dr. Addison stressed that improvements in the macroeconomic environment were closely linked to the ongoing disinflation process, which remains on track.

Headline inflation dropped steadily, reaching 20.4% in August, down from 22.8% in June 2024. Food inflation, in particular, fell to 19.1% in August from 24% in June, while non-food inflation also decreased slightly to 21.5%.

“The disinflation process remains on track, supported by a tight monetary policy stance and easing food inflation,” Dr. Addison said.

He also highlighted that the Bank's core inflation measure, which excludes volatile items like energy and utilities, eased to 19.4% in August from 22.1% in June.

This renewed consumer and business confidence is expected to fuel further economic activity. The Purchasing Managers’ Index (PMI), which tracks the performance of manufacturing and services, reflected this upward trend, rising to 51.1 in August from 50.1 in July.

A PMI reading above 50 indicates expansion in business activity, reinforcing the belief that the economy is on a sustainable recovery path.

The central bank projects continued economic growth, with inflation expected to ease towards its target range of 13-17% by the end of the year.