Ghana: Household spending to average 4.7% per year; to be the 5th largest in SSA – Fitch Solutions
Fitch Solutions, the research arm of credit rating agency, Fitch Ratings, has projected Ghana’s household spending to become the fifth (5th) largest in Sub-Saharan Africa (SSA).
The projection according to the research agency is on the back of an anticipated average 4.7 percent growth in household spending between 2021 and 2025.
“We forecast Ghana’s household spending to be the fifth largest in Sub-Saharan Africa in 2021, and to grow by an average 4.7% per year between 2021 and 2025,” noted Fitch Solutions.
According to the research agency, the strong household spending will result in a robust trade outlook for the country as it expects import of goods to grow by an annual average of 6.7 percent between 2021 and 2025.
“Ghana will benefit from a robust trade outlook, as we forecast goods imports (USD) to grow by an annual average of 6.7% between 2021 and 2025. This strong growth will likely be supported by Ghana’s ambitions to become a gateway to the region’s hinterland and by strong household spending,” stated Fitch Solutions.
The strong household spending is likely to be due to a strong rebound in the Ghanaian economy and recovery from the Covid-19 pandemic due to the pickup in economic activities.
The 33 percentage points Composite Index of Economic Activity (CIEA) recorded by the Bank of Ghana (BoG) at the end of May this year is indicative of the pickup in demand of goods and services and spending by households.
Meanwhile, construction activity in the country according to Fitch Solutions will remain heightened on the back of a well-stocked pipeline of planned road construction projects in the country.
The agency has therefore advised International construction firms to take a keen interest in the nation’s road construction sector given the substantial number of unpaved roads and the demand for maintenance, upgrading and construction of roads by Ghanaians.
“Ghana has one of Sub-Saharan Africa’s longest existing roads networks, ranking among the region’s top five. The high level of current construction activity is highlighted by the large number of road infrastructure projects currently under construction in Ghana. A well-stocked pipeline of planned road construction projects indicates that construction activity in the sector will remain heightened,” said Fitch Solutions in its recent analysis of the country’s road infrastructure.
According to Fitch Solutions, the risk profile of Ghana’s construction sector particularly the road construction sub-sector, is attractive compared with its peers on the continent.
The sector’s attractive risk profile the research agency notes, is supported by an open competitive landscape, availability of cost-effective labour, and wide access to development funding.
Ghana Industry Risk Profile Outperforms Many Economic Peers
SSA – Industry Risk Score & Construction Industry Value, USDbn
Access to infrastructure construction and financing opportunities in Ghana is widened by an open competitive landscape. Ghana’s construction industry is the most diverse in Sub-Saharan Africa, hosting contractors of more distinct nationalities than any other market in the region.
“A comparatively low number of Chinese- and French-held shares of key construction roles enables the diversity of the construction competitive landscape to translate into significant opportunities for a wide range of international construction firms,” remarked Fitch Solutions.
Adding international construction firms currently active in Ghana’s road construction sector benefit from a comparatively attractive labour market, characterised by a large, expanding workforce, strong female participation, and low labour costs.
The agency however, warned international construction firms that they face risks of high severance pay requirements for labour and rigid wage determination structures, all which limit firms’ flexibility in adjusting their labour requirements in response to economic shocks.