The first quarter of 2025 saw Ghana circumnavigating a tricky economic path—juggling its ambition for sustained growth with the pressing need to rein in inflation through tighter monetary policies. While key sectors such as agriculture and services recorded modest gains, the overall economic momentum was dampened by rising interest rates, which constrained borrowing and investment activities. At the same time, the Ghanaian cedi continued to face depreciation pressures, driven by external factors such as global currency fluctuations and internal fiscal imbalances. Top of FormBottom of Form
While the country posted a respectable 5.4% GDP growth year-on-year, matching the performance from the previous quarter, the broader macroeconomic picture was more nuanced. This growth came with constraints: surging inflation, elevated interest rates, and a volatile exchange rate environment that tested the limits of Ghana’s economy.
The story of Q1 2025 is not just one of numbers— it’s about the structural pressures behind those numbers and the policy decisions they trigger. Ghana finds itself in a season where tough choices dominate economic management, especially as policymakers attempt to consolidate fiscal stability while encouraging real sector productivity.
A Fragile Growth Path Amid Mixed Sectoral Performance
At the macro level, Ghana’s GDP growth in Q1 2025 maintained a steady 5.4%, buoyed largely by improved performance in gold production and selected non-oil sectors. However, non-oil GDP growth slowed to 4.8% compared to 6.0% in 2024, indicating underlying vulnerabilities. While this represents moderate economic expansion, it also reflects the tension between growth and necessary fiscal tightening.
The extractives sector, particularly oil and gas, witnessed reduced momentum— a development partially attributed to weaker global demand and domestic production inefficiencies. Meanwhile, sectors such as agriculture and services showed signs of resilience. For instance, gold production surged, providing critical forex inflows that cushioned the cedi’s rapid depreciation. This uptick in gold mining not only contributed to GDP but helped maintain some level of investor confidence in Ghana’s commodity-driven economy.
Yet, this growth is occurring in a climate of reduced public spending. The government, keen on meeting fiscal targets under its IMF-supported programme, has implemented expenditure cuts and revenue-enhancing measures. These steps, while crucial for macroeconomic rebalancing, have subdued demand in the short term— especially among private sector actors dependent on public contracts and subsidies.
Inflation Rate Eases, Reflecting a Slowdown in Price Increases
Ghana’s inflation rate witnessed a marginal decline at the close of the first quarter of 2025, signaling a slight easing in the rate of price increases. According to the latest Consumer Price Index (CPI) report released by the Ghana Statistical Service (GSS), the year-on-year inflation rate for March 2025 stood at 22.4 percent, down from 23.1 percent recorded in February 2025.
This reduction points to a modest moderation in the general cost of living, with the month-on-month inflation rate between February and March 2025 dropping significantly to 0.2 percent. This is a sharp decrease from the 1.3 percent recorded between January and February, suggesting a cooling of price pressures across various sectors.
A closer look at the data reveals that food inflation—traditionally a major driver of overall inflation—also saw a notable decline. It dropped to 26.5 percent in March from 28.1 percent in February. Meanwhile, non-food inflation recorded a marginal increase, rising slightly from 18.7 percent to 18.8 percent. This underscores the continued role of food prices in shaping Ghana’s inflation dynamics.
Regional disparities in inflation remain stark. The Upper West Region recorded the highest regional inflation rate at 36.2 percent, reflecting acute price pressures in that part of the country. In contrast, the Volta Region registered the lowest inflation rate at 18.9 percent, highlighting regional variations in the cost of living.
The inflation breakdown also shows that domestically produced goods experienced higher price increases compared to imported ones. Inflation on local goods was recorded at 25.1 percent, while imported goods saw a lower rate of 18.5 percent. This suggests that internal factors— rather than external pressures like exchange rate volatility or global supply chain disruptions— continue to drive inflation in Ghana.
The Bank of Ghana’s Policy Response to Inflation Expectations
Perhaps the most concerning aspect of Ghana’s Q1 economic performance was inflation. Though there were modest signs of deceleration, inflation remained high, projected between 18% and 25% for the period depending on fiscal policy execution. Inflationary pressures were driven by a combination of high utility tariffs, transport costs, and imported inflation due to exchange rate depreciation.
To combat this, the Bank of Ghana maintained a tight monetary stance. At its 123rd Monetary Policy Committee meeting, the central bank increased the policy rate to 28.00%, signaling its commitment to fighting inflation. This move, though applauded by economists for its decisiveness, has raised borrowing costs across the economy, tightening liquidity for businesses and households.
The Governor, Dr. Johnson Asiama, has outlined a multi-pronged strategy aimed at stabilizing the economy: enhancing foreign exchange reserves, addressing structural imbalances in the forex market, and maintaining inflation-targeting credibility. These actions are expected to reinforce the central bank’s inflation-fighting credentials— a necessary condition for long-term price stability.
The Cedi’s Slide and Partial Recovery
The Ghanaian cedi faced turbulent waters during the first three months of 2025. It depreciated by 5.3% against the US dollar in Q1, with the steepest losses recorded in January (5.3%) and February (3.9%). Also, by the end of March, it was trading at GH¢16.75 per euro and GH¢20.03 per pound — reflecting an 8.2% and 9.2% drop respectively.
These losses were driven by persistent forex demand, limited supply, external debt repayments, and speculative trading. The cedi’s performance, however, saw a glimmer of hope in late March, gaining 0.31% week-on-week and narrowing year-to-date losses to 2.36%. This was largely attributed to the Bank of Ghana’s interventions in the spot market and a slight rebound in export earnings.
Despite these positive signals, the exchange rate outlook remains under pressure. Key risks include lower-than-expected donor inflows, delayed disbursements from multilateral lenders, and weaker-than-projected export receipts. Businesses reliant on imported inputs are feeling the pinch, leading to cost-push inflation that erodes consumer purchasing power.
Fiscal Tightening and the Path Toward Stabilization
In line with its IMF programme, Ghana continued its fiscal consolidation agenda during Q1 2025. This involves reducing the fiscal deficit, increasing revenue mobilization, and achieving a primary surplus. According to the Ministry of Finance, the goal is to streamline government expenditure while improving tax efficiency.
Public sector wage controls, elimination of certain subsidies, and enhanced tax compliance mechanisms have been central to this effort. The Ghana Revenue Authority has intensified enforcement, particularly among informal sector operators. While these efforts are expected to improve fiscal sustainability, they come with short-term sacrifices — including reduced disposable income and a possible increase in informal employment.
Ghana’s fiscal efforts have started yielding some fruit, as evidenced by improved creditworthiness indicators and a narrowing primary deficit. Still, fiscal risks remain elevated, especially given the high interest burden on domestic debt and contingent liabilities related to the energy and financial sectors.
Poverty Projections Amid Economic Reforms
Despite the government’s efforts to stabilize the economy, poverty levels are projected to rise. According to the World Bank, poverty is expected to reach 51.2% by 2027. This projection underscores the challenges faced by vulnerable populations amid economic reforms and fiscal consolidation.
The rise in poverty levels highlights the need for inclusive growth strategies that prioritize social protection and job creation. While macroeconomic stability is essential, it must be complemented by policies that address income disparities and ensure that the benefits of growth are equitably distributed. Failure to do so could undermine social cohesion and the sustainability of economic reforms.
Medium-Term Outlook: A Cautious Path Forward
Despite the challenges, there is a cautiously optimistic outlook for Ghana’s economy over the medium term. Growth is projected to average around 5% annually, driven by recovery in the non-extractive sectors, improvements in agriculture productivity, and sustained momentum in services. Government capital expenditure on infrastructure and energy is expected to increase slightly by mid-2025, contingent on revenue performance.
Investments in digital transformation, agro-processing, and financial inclusion also hold promise. The 24 Hour Economy Policy and other flagship initiatives have the potential to catalyze long-term growth— provided there is continued policy consistency and macroeconomic discipline.
As a result of the World Bank’s projection of poverty to rise to 51.2% by 2027, there’s the need for inclusive growth strategies that target vulnerable communities, including smallholder farmers, informal traders, and urban youth.
Private Sector Caught in a Crossfire
Ghana’s private sector has not been spared from the economic turbulence of Q1 2025. Elevated interest rates have translated into high borrowing costs, constraining access to credit. Many SMEs, already recovering from pandemic-related shocks, now struggle with working capital shortages, delayed payments, and inflation-driven cost escalations.
Despite these constraints, pockets of innovation persist. Digital finance platforms have grown in popularity, offering alternative sources of funding and streamlining payments. Ghanaian fintech firms are also partnering with traditional banks to improve credit scoring models and reduce default risk.
The Ghana Investment Promotion Centre (GIPC) has also reported modest foreign direct investment inflows, particularly into the renewable energy, agribusiness, and construction sectors. These investments provide a much-needed boost in a period marked by general uncertainty.
Policymakers will need to keep a steady hand. Balancing inflation control with growth promotion, exchange rate stability with export competitiveness, and fiscal consolidation with social protection will be essential. As Ghana walks this tightrope, success will depend on prudent decision-making, credible institutions, and the resilience of its people and private sector.