It appears that some sectors of the economy are bearing the brunt of the government’s tight fiscal prudence, which has resulted in limited public expenditure.
The drive towards fiscal consolidation may be yielding broader macroeconomic stability, but a closer look at the latest GDP data reveals some sort of trade-off within some sectors.
A critical analysis by The High Street Journal has revealed that some of the public service sectors are taking the hit.
2025 Q1 Economic Performance
The latest GDP data published by the Ghana Statistical Service (GSS) reveals that Ghana recorded an impressive 5.3% real GDP growth in the first quarter of 2025.
The significant expansion was mainly driven by two key sectors: Agriculture and Services, while Industry, however, recorded a contraction.
The agriculture sector, which grew by 6.6%, was mainly driven by the crops sub-sector. The Agriculture sector was closely followed by the Services sector, recording an expansion of 5.9%. The sector’s growth was mainly driven by subsectors such as the Information and Communication Technology (ICT), Finance and Insurance, Transport and Storage, as well as Health and Social Work.
Some analysts say this news and welcoming and a reflection of an economy that is responding to the policy interventions of the government.
The Contraction of Some Subsectors
Despite the significant economic expansion, several critical subsectors contracted. According to the GSS data, these subsectors include Public Administration, Defense & Social Security; Education; Water Supply, Sewerage, Waste Management & Remediation; and Forestry & Logging.
“Public Administration, Defense & Social Security, Education, Water Supply, Sewerage, Waste Management & Remediation, and Forestry & Logging were the main sub-sectors that contracted in Q1 2025,” parts of the GSS data announced.
For instance, the Public Administration and Defence, Social Security subsector contracted by 4.2%. The education subsector also shrank by 4%. Water Supply and Sewerage also contracted by 3.7%, including Forestry and Logging, which also saw a 2.5% contraction.
What do these sectors have in common? They are largely publicly funded and government expenditure-dependent.
This means they are casualties of the government’s strict expenditure control measures aimed at limiting budget deficits and ensuring fiscal prudence. While the fight expenditure control measures are needed, there is a trade-off.
The current administration has adopted a tight spending policy, curbing expenditure in non-priority areas in a bid to stabilize the economy and reduce reliance on external borrowing. While this has contributed to moderating inflation (down to 18.4%) and stabilizing the cedi, and building significant reserves, it has also meant that sectors which rely on public spending are starved of funds.
The Socio-Economic Impact
The contraction of these subsectors has a socio-economic impact that requires a balancing impact. For instance, the Water and Sanitation sectors, which are already under strain, are now further constrained, risking progress in public health and environmental sustainability. Forestry, which plays a critical role in Ghana’s climate resilience and rural economies, is also feeling the pinch.
The situation calls for a more balanced approach which does not stifle other subsectors but protects vital public sectors while maintaining fiscal discipline.
How do we grow the economy without shrinking the state’s most essential services? It’s a question the current government must answer.
