August private sector credit-to-GDP gap remains negative
The Bank of Ghana (BoG) has revealed that the private sector credit-to-Gross Domestic Product (GDP) gap remained negative as of August 2025, signalling continued weak credit growth in relation to the size of the economy.
According to the Central Bank’s September 2025 Monetary Policy Report, the private sector credit-to-GDP ratio has not only stayed below its long-term trend but has also declined further, reaching what the report described as an all-time low.
The private sector credit-to-GDP gap is a key indicator used to assess macro-financial risks. A positive reading suggests that credit to the private sector is expanding faster than the economy’s long-term average, while a negative reading points to subdued lending activity and a potentially credit-constrained business environment.
“The negative and declining private sector credit-to-GDP gap suggests the need for measures to promote credit delivery to support the real economy,” the BoG noted in its report.
The persistent weakness in credit expansion comes despite gradual macroeconomic stabilisation and declining inflation in 2025.
Nonetheless, the Central Bank reported a steady improvement in the soundness of the banking sector during the same period. As of August 2025, the Banking Sector Soundness Index was said to be significantly above its long-term trend, approaching pre-DDEP levels.
“This reflects improving solvency positions, adequate liquidity buffers, and strong earnings performance across the sector,” the report indicated.
The BoG, however, cautioned that the non-performing loans ratio, though marginally improved, remained elevated. It attributed the high level of impaired assets to legacy exposures and the slow pace of credit growth, which continues to constrain lending recovery.
Even so, the Bank expressed optimism that ongoing macroeconomic recovery, coupled with banks’ initiatives to strengthen credit risk management, will help contain the build-up of new non-performing loans and improve overall asset quality.
The report reiterated the BoG’s commitment to fostering a stable financial environment that supports sustainable private sector credit growth and economic expansion.
