Ghana's Household Spending Projected to Reach GH¢129.7bn in 2025

Ghana’s household spending is projected to experience growth of 2.5% year-on-year in 2025, following a more modest increase of 1.1% in 2024. According to Fitch Solutions, this upward trend will bring the total household expenditure to GH¢129.7 billion in 2025, representing a 25.4% increase compared to GH¢103.4 billion recorded in 2019, before the onset of the pandemic.

Fitch Solutions attributes this anticipated growth primarily to two key factors: a reduction in inflation and improved stability in the value of the Ghanaian cedi. Both elements are expected to create a more favorable environment for consumer spending, supported by a dovish policy approach from the Bank of Ghana (BoG). As inflation cools and the cedi stabilizes, the central bank is likely to adopt policies that facilitate consumer activity and improve purchasing power for households.

Fitch Solutions forecasts that, as inflation eases and the currency stabilizes, Ghanaian consumers will begin to regain their purchasing power. This shift is expected to result in a rebound in consumer spending, including both essential goods and discretionary purchases. Following the presidential elections in December 2024, there has already been a noticeable increase in consumer activity, with households showing signs of recovery from the challenges of high inflation and a volatile cedi. With the improved economic outlook for 2025, spending is expected to see a significant boost across various sectors.

In support of this outlook, high-frequency data shows a notable rise in consumer activity, particularly in mobile money transactions, a key indicator of economic engagement in Ghana. In December 2024, mobile money transactions reached a record 745 million, a considerable jump from the 678.8 million recorded in July 2024. This sharp increase is indicative of a growing level of consumer confidence and expenditure, especially in the period following the presidential election. The upward trend in mobile money transactions highlights not only the recovery in consumer sentiment but also the overall increase in economic activity, as more people engage in financial transactions through mobile platforms.

Fitch Solutions also points out that while inflation remains a key driver in the increase of mobile money transaction values, the growth rate of transactions is significantly outpacing inflation levels. This suggests that consumer spending is recovering faster than inflation, which is a positive indicator for Ghana’s economic health. The acceleration in mobile money transactions is seen as an early sign of stronger consumer demand, which is expected to carry over into the second half of 2024 and into 2025, further fueling household spending growth.

The firm concludes that the easing of inflation in 2025 will play a significant role in further driving up consumer spending. Lower inflation will not only boost purchasing power but also encourage more transactions, with the added benefit of lower debt servicing costs. With inflation under control, consumers will have more disposable income, which will likely contribute to greater spending in both essential and non-essential categories.

In addition to these factors, Fitch Solutions also notes that a lower inflation rate will help reduce the cost of living for households, allowing for greater economic stability. As inflationary pressures ease, households will feel more confident in their ability to make both necessary and discretionary purchases, stimulating further economic growth.

Overall, the combination of lower inflation, greater currency stability, and a dovish approach from the Bank of Ghana is expected to create a more favorable environment for consumer activity in 2025. As a result, Ghana’s household spending is set to see a significant rebound, contributing to broader economic recovery. The rise in mobile money transactions and the ongoing recovery in consumer confidence both suggest that 2025 will be a year of renewed economic activity, driven by an increase in household consumption and a more stable economic environment.