Real household spending is expected to grow or expand by 4.2% in 2021 and accelerate to 4.7% in 2022, Fitch Solutions has stated.
This follows an estimated contraction of 1.1% last year due to the negative impact of the Covid-19 pandemic.
“We forecast real household spending to grow by an annual average of 4.7% over the medium term (2021-2025). This is in line with our Country Risk team’s forecast for Ghana’s Real Gross Domestic Product which is projected to grow by 4.2% in 2021 and to accelerate to 4.9% in 2022. Over the 2021-2025 period, Ghana’s real GDP will grow by an annual average of 4.8%.”
According to a report, the rising inflation is impacting on the real gains in disposable incomes.
“We note that while we forecast disposable income growth to be positive, inflation will be in line with income growth, meaning that consumers will have limited real income growth and this will result in consumers remaining price sensitive.”
Nevertheless, it said consumers will prioritise food and non-alcoholic drinks spending as they allocate their budgets, remaining the largest household spending category over the medium term.
Additionally, the report said, the gradual urbanisation of households in Ghana will bode well for the sector, offering a growing target market over the longer term.
The report further added that the positive growth in household spending will support food and non-alcoholic drinks spending, pushing consumers into the formal Mass Grocery Retail sector.
In Ghana, like in many Sub-Saharan Africa countries, food and non-alcoholic drinks makes up a significant proportion of household budgets.
“We project Ghanaian households to allocate 43.0% of total household budgets towards food and non-alcoholic drinks in 2021, decreasing slightly, to 42.7% in 2025”, Fitch Solutions noted.
In nominal terms, it projected food and non-alcoholic drinks spending of ¢141.4 billion ($23.8bn) and ¢160 billion ($25.7bn) in 2021 and 2022 respectively.