Following two-way trade volumes between Ghana and China hitting a record level of US$7.46 million in 2019, as revealed by statistics released last week, the impact of COVID 19 is expected to result in a sharp cut back in both the volume and value of two-way trade between the two nations this year.
While official trade figures for the first half of 2020 have not yet been made public, sources at Ghana’s Ministry of Trade and Industry estimate that both volumes and value of both Ghana’s imports and its exports from and to China could fall by as much as a quarter this year due to a combination of supply chain disruptions and travel restrictions. This would take the total trade volume to around the 2018 level of US$5.3 billion.
Ghana’s total exports worldwide contracted by nine percent year-on-year during the first eight months of 2020 while total imports similarly shrank by 9.2 percent. However, being that China has become Ghana’s biggest trade partner, experts expect the effect of COVID 19 on Ghana China trade to be deeper than the average for Ghana’s global trade.
China’s imports from Ghana have been particularly hard hit because of the slumps in both demand for and global prices of crude oil, Ghana’s biggest export to China. Indeed, for the first eight months of 2020, Ghana earned US$1,142.5 million from crude oil sales than it did for the corresponding period of last year and a substantial part of this was due to lower crude oil exports to China, a country which buys nearly half of Ghana’s entire oil exports.
Instructively, almost immediately following the closure of Ghana’s borders at the end of March in response to the importation of the first confirmed cases of the coronavirus, the consequent fall in imports from China actually led to a significant appreciation of the cedi which gained 20 pesewas on the dollar within a month simply because of a sharp reduction in importation of consumer goods from China.
However, this will only be a temporary blip trade analysts agree. China has already reported a return to economic growth in the third quarter of this year, with its economy growing by 4.9 percent, and Ghana’s economy looks set for a rebound too after a sharp 3.4 percent contraction for the second quarter. The only question though is the effects of Ghana’s hurried efforts towards import substitution during the international supply chain disruptions brought about by the global pandemic.
This however is being correctly seen as a good thing; Ghana has a major trade deficit in its trade dealings with China importing more than one and a half times what it exports. And total trade volumes are equivalent to about 10 percent of Ghana’s Gross Domestic Product.
This means that the lower trade volumes between Ghana and China this year is not necessarily a bad thing. What is more important than the size of two way trade between the two countries is the size of Ghana’s trade deficit against China and if that narrows because of COVID 19 it will amount to poetic justice of a sort; Ghana has suffered COVID 19 which originated from China in the first place so it would be fitting if it results in Ghana getting better terms of trade in its dealings with China.