Macroeconomic stabilisation achieved, but is the real sector responding?

…Ghana’s macroeconomic reset is real and measurable. But how much of it is reaching factories, shops and workers? A data-driven assessment at 16 months.

By Dr Stephen Lartey & Dr Theophilus Acheampong | Economists

When the Mahama administration took office in January 2025, it inherited an economy under considerable strain — two years of elevated inflation, a weakened cedi, and the fiscal pressures that followed Ghana’s domestic debt restructuring. Sixteen months on, the headline indicators point to a meaningful turnaround. Inflation has fallen from 23.8 per cent to 3.2 per cent. The cedi has recovered approximately 40.7 per cent against the dollar during 2025. International reserves stand at a record $14.5 billion (February 2026). GDP growth reached 5.95 per cent overall and 7.57 per cent on a non-oil basis in 2025 — the strongest non-oil performance since 2019.

These are encouraging developments, and they deserve to be acknowledged as such. The more probing question — one that business owners, industry associations and workers are beginning to raise — is the extent to which these gains are being felt in the real sector. It is a question this analysis attempts to address with data.

Figure 1: Ghana: Macro Stabilisation vs Real-Sector Activity. Headline inflation has fallen sharply since 2023 while the PMI has remained close to its neutral threshold of 50. Green dotted line = Mahama administration (Jan 2025).

The macro recovery in numbers

The statistical evidence for macro improvement is clear. Comparing the 12 months of 2024 with those of 2025, every major macroeconomic indicator shifted in a positive and statistically significant direction. Inflation fell by more than eight percentage points. The cedi appreciated by approximately 14 per cent against the US dollar on an annual average basis. Gross international reserves rose by approximately $4 billion. These shifts are confirmed through formal t-tests at conventional significance thresholds — they are not artefacts of seasonal adjustment or base effects.

Source: Author’s calculations. Bank of Ghana and Ghana Statistical Service data, 2018–2025. Note: PSC = Private Sector Credit.

Figure 2: Ghana: Inflation & Monetary Policy Rate, 2018–2025. Headline and core inflation peaked above 54% during the 2022–2023 fiscal crisis before declining sharply as monetary tightening took hold.

The Composite Index of Economic Activity (CIEA), which aggregates activity across agriculture, industry, construction and services, also recovered visibly. Real CIEA growth more than doubled from 2.4 per cent in 2024 to 6.1 per cent in 2025 — a statistically significant improvement (p

A more measured picture in the private sector

Against this backdrop, the performance of the Purchasing Managers’ Index — the PMI — warrants careful attention. The PMI, compiled monthly by S&P Global from surveys of approximately 400 Ghanaian private sector firms across agriculture, manufacturing, construction, services and retail, is a timely indicator of business conditions. A reading above 50 indicates expansion in activity relative to the previous month; below 50 indicates contraction.

The average PMI in 2024 was 50.13 — marginally in expansion territory. In 2025, despite the substantial macro improvements noted above, the average PMI edged to 50.33. The difference of 0.20 index points carries a p-value of 0.530, which is statistically indistinguishable from no change. This does not mean the private sector is performing poorly in absolute terms — it has remained in expansion territory throughout. It does suggest, however, that the macro recovery has yet to translate into a discernible acceleration in private sector activity.

Figure 3: Ghana: Real Sector Activity Indicators, 2018–2025. The PMI (left axis) has held close to the neutral threshold of 50, while CIEA growth (right axis) has recovered more strongly, particularly from 2024 onward.

This gap between macroeconomic improvement and private sector momentum is not unusual in post-crisis recoveries. It reflects, in part, the time lags inherent in how monetary and exchange rate conditions work their way through to business costs, credit availability and consumer demand. The important question is which channels are working, and which are not yet fully open.

What the data reveal about transmission

To explore these questions more rigorously, this analysis estimates a Vector Autoregression (VAR) model using 96 months of data from January 2018 to December 2025. The model incorporates headline inflation, the monetary policy rate (MPR), the exchange rate, international reserves, and either the PMI or CIEA as the real-sector measure. Global oil prices, the crisis period, and the post-January 2025 period are included as additional controls.

Three findings emerge from the Granger causality tests, which assess whether movements in macro variables systematically precede changes in real-sector outcomes.

First, macro variables taken together do significantly precede PMI movements (chi-squared = 21.92, p = 0.038). The macro environment does shape private sector conditions — the question is through which mechanism.

Second, the most active individual channel appears to be the exchange rate (p = 0.095), rather than inflation or the policy rate directly. This is consistent with the experience of many import-dependent economies: currency appreciation lowers input costs, reduces pricing uncertainty and eases the cash flow pressures that weigh on business confidence. The cedi’s recovery since late 2024 appears to be doing meaningful work in this regard.

Figure 4: Ghana: Exchange Rate & International Reserves, 2018–2025. The sharp cedi depreciation during the 2022–2023 crisis and its subsequent recovery closely track movements in gross international reserves.

Third, there is no evidence of reverse causality — the real sector is not driving the macro recovery. The direction of influence runs from macro conditions to real-sector outcomes, which is consistent with the policy sequencing that has been pursued.

A complementary quarterly VAR using GSS real GDP growth data adds a further dimension. At the quarterly frequency, all three macro channels — inflation (p=0.038), the monetary policy rate (p=0.009), and the exchange rate (p=0.042) — significantly precede GDP growth, with no reverse causality detected (p=0.358). The MPR alone explains approximately 42 per cent of quarterly GDP forecast variance, indicating that monetary policy has a more powerful effect on measured output than on business sentiment indicators such as the PMI.

Figure 5: Ghana: Real GDP Growth (% YoY), 2011–2025. GDP growth declined sharply during the 2020 COVID shock and 2022–2023 fiscal crisis, but has recovered to around 6% through 2024 and 2025.

The credit channel: the missing link

One area that merits continued attention is the monetary transmission channel — and here the data tell a particularly stark story. Pre-crisis evidence (2018 to April 2022) shows that MPR movements significantly preceded PMI changes: the conventional monetary policy channel was functioning. That relationship appears to have weakened since, and has not yet fully reasserted itself.

This is understandable given the context. Banks that absorbed losses through the domestic debt exchange, and that continue to price elevated credit risk into their portfolios, tend not to reduce lending rates in immediate lockstep with central bank rate cuts. The Bank of Ghana reduced its policy rate from a peak of 30 per cent to 14.0 per cent by March 2026 — a cumulative reduction of 16 percentage points. The 91-day Treasury bill rate fell to 4.89 per cent from 35.5 per cent in 2022. Average commercial bank lending rates, however, remain at 17.74 per cent as of March 2026 — sticky relative to the policy rate. The pass-through is ongoing, but it takes time.

This breakdown in monetary transmission is now quantifiable. A separate VAR estimated on monthly private sector credit (PSC) growth from 2018 to 2025 finds that none of the macro stabilisation variables — inflation, the monetary policy rate, or the exchange rate — significantly Granger-cause credit growth (all p>0.17). The credit channel is not merely slow; it is statistically disconnected from the macro environment.

Figure 6: Ghana: Private Sector Credit Growth (% YoY), 2018–2025. Nominal credit growth surged during the crisis but has decelerated sharply since mid-2025, even as the policy rate was cut aggressively.

The before-and-after comparison reinforces this point directly. Nominal private sector credit growth actually decelerated from an average of 32.8 per cent in 2024 to 22.9 per cent in 2025 — a statistically significant decline (p=0.010). In real terms, after adjusting for inflation, credit to the private sector contracted for most of 2025. Firms and households were receiving less credit in real terms even as headline inflation was falling and the policy rate was being cut aggressively.

The impulse response functions make this concrete. An MPR shock produces a negative point estimate for PSC growth throughout the 18-month horizon, with confidence intervals spanning zero — confirming that rate cuts have not yet produced a discernible credit expansion. Similarly, disinflation is associated with declining credit growth over months 3 to 12, before recovering. Both channels remain impaired. This is the clearest empirical expression of the disconnect between macro stabilisation and felt prosperity.

This is not a criticism of monetary policy — the pace of easing has been commendably swift. It is, rather, a recognition that restoring the credit channel after a debt restructuring episode requires patience, sustained financial sector stability, and in some cases targeted support for sectors where credit constraints are most binding.

On structural continuity

A note on attribution is also warranted. Formal structural break tests find no evidence of a shift in the macro-to-PMI transmission relationship at January 2025. The Chow test returns F = 0.86 (p = 0.531); the Quandt-Andrews procedure identifies September 2020 — the COVID-19 shock — as the only statistically significant structural break in the sample.

This finding has a constructive interpretation: the transmission channels through which the current stabilisation is operating are the same ones that were functioning during the post-COVID recovery period. The gains reflect improved macro inputs — lower inflation, a stronger currency, higher reserves — flowing through a relatively stable economic structure. It also means that further improvements in real-sector outcomes are likely to follow as those inputs continue to feed through, provided the macro gains are sustained.

Areas for continued policy focus

Drawing on the empirical findings, three areas stand out as deserving sustained policy attention in the period ahead.

1. Sustaining exchange rate stability. The evidence suggests that the exchange rate is currently the most active channel linking macro conditions to private sector performance. Policies that protect this gain — prudent fiscal management, reserve accumulation, and investor confidence — will support continued improvement in business conditions, particularly for firms that rely on imported inputs or denominate contracts in foreign currency.
2. Restoring the credit channel. The empirical evidence confirms the credit channel remains impaired — private sector credit contracted in real terms through most of 2025 despite aggressive monetary easing. Complementary measures beyond rate cuts are therefore not merely desirable but necessary. Targeted credit guarantee mechanisms, SME-focused lending facilities, or incentivised bank recapitalisation could help transmit the benefits of lower policy rates to a broader range of firms more quickly.
3. Addressing infrastructure constraints. Energy reliability continues to be cited by industry groups as a significant constraint on production and investment decisions. Sustained improvements in power supply would complement the macro stabilisation programme by reducing one of the key cost pressures that macro policy alone cannot address.

Looking Ahead

The macroeconomic improvements recorded over the past 16 months are substantial and, on the available evidence, genuine. They have restored investor confidence, reduced the cost-of-living burden for households, and rebuilt external buffers that give the economy greater resilience to future shocks. These are important foundations.

The data also suggest, with appropriate candour, that the translation of these gains into measurable improvements in private sector activity is still in progress. The CIEA’s recovery is encouraging; quarterly GDP growth has held above 6 per cent. But the PMI’s relative stability and the contraction in real private sector credit reflect structural constraints — notably in the credit channel and in energy — that macro policy does not directly resolve.

The outlook, nonetheless, is constructive. With the exchange rate channel active, the credit channel gradually opening, and the broader economy showing stronger momentum, the conditions for a more broad-based recovery are taking shape. The pace at which that recovery becomes felt across the private sector will depend, in large part, on the durability of the macro gains achieved so far and on continued progress in the areas identified above.

Ghana’s economic stabilisation has established a credible platform. The task now is to translate that platform into sustained, inclusive growth — a process that is already under way, even if it remains, at this stage, incomplete.

The views expressed in this article are those of the authors in their personal capacities and do not represent the position of any institution or organisation.

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