Household spending is set to reach ¢107.8 billion in 2023, higher than the ¢101.9 billion posted in 2019.

According to Fitch Solutions latest report dubbed ‘Ghana Consumer Outlook’, spending will expand to ¢112.1 billion in 2024.

Nonetheless, it said a stubbornly high levels of inflation and fiscal consolidation policies will weigh on real purchasing power gains for many consumers in Ghana.

“Our forecast for consumer spending growth in Ghana over 2023 and 2024, is in line with our Country Risk team's forecast that economic growth in Ghana will decelerate to 3.0% year-on-year in 2023 before rising to 3.7% year-on-year over 2024. Inflation has become a major headwind to consumers in Ghana, and we expect it will remain elevated second half of 2023”.

The UK-based firm said interest rate hikes are pushing up household debt repayment costs, whilst a depreciating cedi is making consumer goods imports more expensive. 

It argued that the high levels of inflation, slower economic growth, rising levels of dissatisfaction with government policy and interest rate hikes are all contributing to a downbeat Ghanaian consumer.

The report furthered that inflationary pressures remain elevated in many markets. While the rate of price changes are slowing, they remain higher than central banks’ targets and higher than what consumers have grown accustomed to, especially over the past decade.

“In many markets, inflationary pressures remain elevated. While the rate of price changes are slowing, they remain higher than central banks’ targets and higher than what consumers have grown accustomed to, especially over the past decade. The impact will not be spread evenly across the different consumer spending segments, with the prices of some components, such as rent; services; and some food items (e.g. meat and poultry), remaining stickier and elevated over second-half of 2023).

Consumers to continue to see erosions in purchasing power

Fitch Solutions stressed that if nominal wages cannot keep up with these high rates of inflation, consumers will continue to see erosions in their purchasing power. 

“If nominal wages cannot keep up with these high rates of inflation, consumers will continue to see erosions in their purchasing power. The uneven nature of price increases will mean that consumers will have to increasingly allocate more of their disposable income towards meeting basic necessities”, it furthered.

Over 2024, it said many markets will report significantly lower rates of inflation, as base effects play a role, but warned that “if nominal wage growth continues to struggle to keep pace with inflation, household purchasing power will remain weak over 2024, weighing heavily on our spending outlook for that year”. 

Inflation remains high

Ghanaian consumer price inflation came in at 43.1% year-on-year in July 2023, while food price inflation at 54.2% year-on-year, after having seemingly been on a downtrend since January 2023.

This is significantly higher than what Ghanaian consumers are used to, where over 2015-2019, inflation averaged just 12.4% year-on-year. Such high levels of inflation are creating substantial downward pressure on both real spending growth, but also consumer and business sentiment.