Green shoots in tight soil: Ghana’s growth momentum amidst fiscal austerity

By Prof. Samuel Lartey

Introduction: Growth Through the Cracks of Constraint

In a compelling turn of events, Ghana’s economy is projected to grow by more than 4.8% in 2025, according to IC Research’s June 2025 report titled “Ghana’s Q1 2025 Real GDP Growth: Green Shoots in Tight Soil.” This upbeat forecast arrives at a time when the country is managing fiscal discipline under an IMF programme, debt restructuring, inflationary pressures, and structural inefficiencies. The metaphor of “green shoots in tight soil” accurately captures the paradox: growth is happening but under significant pressure.

Despite these constraints, Q1 2025 GDP growth reached 4.9%, supported by agriculture, extractives, and a resurgent services sector. With momentum building across key sectors, Ghana is defying the odds and writing a new chapter in its post-COVID economic story.

Q1 2025: Sectoral Performance Snapshot

According to the Ghana Statistical Service (GSS), real GDP growth in Q1 2025 was driven by:

| Sector              | Growth Rate (Q1 2025) | Contribution to GDP |

| ———–         | ———————                      | ——————- |

| Agriculture     | 5.2%                                                 | 19.3%               |

| Industry            | 4.4%                                               | 31.2%               |

| Services           | 6.0%                                               | 49.5%               |

Figure 1: Sectoral Contributions to Q1 GDP (2025)

The services sector, buoyed by finance, insurance, and ICT, was the leading contributor, while agriculture benefited from favourable weather and government support under Planting for Food and Jobs Phase II. The industry sector, particularly oil and gas, rebounded after a slump in 2023.

Drivers of Economic Resilience

1. Fiscal Reforms Under IMF Programme

1. Ghana’s IMF Extended Credit Facility (2023–2026) has focused on revenue mobilisation, expenditure rationalisation, and debt sustainability. So far:
2. VAT and e-Levy reforms increased tax revenue by GHS 11.4 billion in Q1 2025
3. Public debt declined from 88.1% of GDP in Dec 2022 to 66.3% in March 2025
4. Primary fiscal balance is projected to return to surplus by end-2025

These reforms have created space for essential capital investments in roads, agriculture, and SMEs despite tight spending controls.

2. Monetary Policy and Inflation Management

The Bank of Ghana has kept the policy rate at 29.5%, helping reduce inflation from 40.3% in May 2023 to 20.1% in May 2025. This improved inflation outlook has:

1. Stabilised the cedi (GHS 12.90/USD as of June 2025)
2. Boosted purchasing power and consumer confidence
3. Lowered import costs and input prices for local businesses

3. Digital Transformation and Innovation

Ghana’s digital economy estimated at USD 3.5 billion in 2024 is expanding rapidly, driven by fintech, mobile money (GH₵1.3 trillion in 2024 transactions), and e-commerce. Startups in agritech, healthtech, and education are attracting foreign investment, while the government’s Digital Economy Policy (2023–2030) is supporting broadband and data infrastructure expansion.

Implications for the Government’s Growth Agenda

a. Economic Restructuring and Diversification

1. The government’s Post-COVID Programme for Economic Growth (PC-PEG) focuses on:

• Diversifying exports beyond cocoa, gold, and oil
• Supporting agro-processing and value-added manufacturing
• Building a digital and green economy
• Real GDP growth above 4.8% enables the government to exceed its GHS 165 billion revenue target for 2025, further closing the fiscal gap and reducing borrowing needs.

b. Employment and Inclusive Growth

1. Ghana’s unemployment rate dropped from 13.9% in 2023 to 12.1% in Q1 2025, partly due to:
2. YouStart Programme: 86,000 youth entrepreneurs supported
3. Agriculture Mechanisation Services: 2,000 jobs created in Q1
4. Digital Jobs and BPO Centres: 15,000 jobs in Accra, Kumasi, and Tamale
5. These initiatives are critical to reducing poverty and boosting household incomes.

c. Foreign Investment and Business Confidence

1. Foreign Direct Investment (FDI) is recovering, with USD 1.3 billion recorded in Q1 2025 (GIPC). Key sectors include:
2. Renewable energy (solar farms in Upper East and Volta)
3. Real estate and construction (major urban housing projects)
4. Extractives (new gold and lithium explorations in Western and Ashanti regions)

Impact on Businesses and the Citizenry

1. For Businesses:
2. Reduced Inflation has improved input cost predictability
3. Stable Exchange Rate enables better trade planning
4. New Credit Access initiatives under BoG’s credit reform will improve access to single-digit interest loans over the next 3–4 years

For Households:

1. Food inflation has eased from 54.5% in 2023 to 18.3% in May 2025
2. Power supply stability has improved through GRIDCo investment in substation automation and transmission upgrades
3. Increased household consumption—especially in rural areas due to input subsidies and improved market linkages

Risks and Strategic Safeguards

| Risk                                                                 | Potential Impact                      | Government Response                        |

| ——————————–                   | ————————————-           | ———————— |

| Global commodity price shocks         | Lower export revenue, FX pressures    | Expansion of local manufacturing & exports |

| Fiscal slippages (Election 2025)         | Budget overruns, inflationary rebound | IMF programme oversight and spending caps  |

| Climate impacts                                         | Agricultural and hydro risk           | Investment in irrigation and early warning |

Conclusion: A Path Forward Through Prudence and Productivity

Ghana’s economic outlook in 2025 tells a story of disciplined resilience. The projected 4.8%+ growth rate is not merely a numerical statistic, it is a reflection of a rebounding real economy, effective policy coordination, and rising citizen confidence. While challenges remain, the data suggests Ghana is moving from a posture of survival to sustainable productivity.

For the government, the challenge now is to maintain momentum, avoid election-year excesses, and ensure that growth translates into jobs, business opportunities, and better public services.

Indeed, the green shoots are sprouting. With sustained care rooted in transparency, innovation, and inclusive governance they can grow into an economic forest of shared prosperity.