The latest Standard Bank Research has forecasted an improved economic performance and narrowing of the current account deficit in 2018 with the expected cut in electricity tariffs and a continuous strong base effect from food inflation as drivers to bring year-on-year inflation to around 9.3 per cent.
The bank is confident the country’s economy can favourably compete with other established ones outside the continent should the current economic outlook derived from the stability in the macroeconomic environment coupled with the strong balance of payment position is sustained.
Head of Global Markets at Stanbic Bank Ghana, Ms. Afua Bulley, gives the economy a positive review by stating: “The prospects are looking good and if the managers of the economy are able to sustain the economic stabilization programme through a return to strong fiscal consolidation, we are confident that the economy will rub shoulders with the economies of Europe and the West.”
The research projects economic growth to accelerate to 8.5 percent over the medium term in 2018 and then moderate at 6.2 percent in 2019 as the budget and current account deficits narrow amid lower inflation and falling interest rates. Trade between the local currency and the dollar is also expected to rise “modestly” to about 4.75 by year-end.
According to the bank’s report, the “current account deficit will probably continue narrowing towards 3.3 percent of GDP this year from around 4.6 percent of GDP in 2017, partly as a result of a faster than expected fiscal consolidation path, but also due to rising export revenues from oil and gold mining.”
Speaking on the projections for Ghana’s economy, Ayomide Mejabi of Standard Bank Research stated: “Although the trade surplus will probably narrow this year as imports rise in reaction to a more accommodative stance taken by the Bank of Ghana, it should remain in surplus. This is as oil production continues to rise at a steady pace. The scheduled shutdown of the Jubilee oil field for maintenance of the FPSO should do little to stand in the way of oil production reaching 150k bpd by the end of this year.”
He continued, “The financial account should also receive ample inflows this year, not only because portfolio inflows should continue steadily but also due to a possible increase in Eurobond issuance.”
The Standard Bank economist noted that the interventions aforementioned are expected to positively impact the country’s forex reserves higher than the current end of year projection of USD5.8 billion (equivalent of 5.1-m of import cover), a possible indicator to excite investor interest.
“At this time, we are not overly concerned about the risk that a potential outflow of portfolio capital may pose on forex reserves despite the fact that offshore holdings of Ghanaian bonds amount to just over USD5 billion. This is because we suspect another round of monetary policy easing in addition to reasonable strong fiscal consolidation and supportive balance of payment dynamics should be enough to keep investors interested,” Mr. Mejabi said.
The World Bank, in its outlook for Ghana, has also projected the economy to be the best performing economy on the African continent.
By Godfred Tawiah Gogo