Economy records best reading since Q4 2021 in Q1

GDP growth accelerated to 4.7% year on year in the first quarter, from 3.8% in the fourth quarter of last year. Similarly, on a seasonally adjusted quarter-on-quarter basis, economic growth improved, to 1.2% in Q1 compared to the previous quarter's 1.0% expansion. Both readings were the strongest since Q4 2021.

The annual upturn largely reflected better at-home dynamics. Domestically, total investment growth hit an over two-year high of 13.8% in the first quarter, rebounding from the fourth quarter's 25.9% contraction. Moreover, public spending growth more than tripled to 9.2% in Q1 (Q4 2023: +2.8% yoy). Less positively, household consumption growth slowed to 11.2% year on year in Q1 from a 19.2% expansion in Q4. Turning to the external sector, exports of goods and services fell 14.7% on an annual basis in the first quarter, which was a deterioration from the fourth quarter's 7.9% contraction. Meanwhile, imports of goods and services growth moderated to 10.8% in Q1 (Q4 2023: +15.2% yoy). Looking at sectoral-level data, the acceleration was due to the industrial sector tallying its best performance in nearly five years. This outweighed slowdowns in both the services and agricultural sectors.

Our Consensus is for annual GDP growth to be milder in Q2–Q4. Still, the economy is seen growing at a stronger pace than in 2023 over this year as a whole. A rebound in fixed investment, stronger exports and—most notably—public spending will prompt the upturn. Moreover, following the recent debt-restructuring deal with creditors opening the door for further IMF financing, forecasts could be upwardly revised in the coming months. Less positively, despite lower inflation and expectations that the Bank of Ghana will resume its loosening cycle this year, private consumption will slow from last year.

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