Economy expands at fastest pace in five years in Q2

Year-on-year GDP growth smashes expectations: GDP growth gained steam to 6.9% year on year in the second quarter, up from 4.8% in the first quarter and marking the best result in five years. The upturn overshot market projections by more than twice. On a seasonally adjusted quarter-on-quarter basis, economic growth improved to 1.6% in Q2, up from the previous quarter's 1.2% increase and marking the best result since Q4 2021.

Exports and industry spearhead improvement: The annual upturn was chiefly driven by the external sector: Exports of goods and services rebounded, growing 12.6% year on year in the second quarter (Q1: -14.7% yoy), which marked the best reading since Q4 2019. Conversely, imports of goods and services growth moderated to 8.7% in Q2 (Q1: +10.8% yoy). Domestically, the economy performed less stellarly: Household spending growth eased to 8.5% in Q2 (Q1: +11.4% yoy), marking the weakest expansion since Q4 2022. Similarly, government spending growth moderated to 2.1% in Q2 (Q1: +7.6% yoy). Lastly, total investment swung to contraction, falling 3.1% in Q2, contrasting the 13.8% expansion in the previous quarter. Looking at sectoral data, the improvement was broad-based, with the agricultural, services and, particularly, industrial sectors all expanding at faster paces than in Q1 in Q2.

Economy could have turned a corner: The Ghanaian economy appears to be on track for recovery. It reached successful debt restructuring agreements in recent months, unlocking vital IMF funds in the process. In addition, inflation averaged the lowest since Q1 2022 in Q2 and eased further through August; accordingly, the Bank of Ghana was able to resume its easing cycle in September and slash interest rates by 200 basis points. All these developments bode well for private consumption and, particularly, the investment environment next year, spearheading an acceleration in GDP growth compared to 2024.

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