14 March 2018

Ghana: Standard Bank Report Paints Positive Outlook for Ghana's Economy

Economists at the research desk of Standard Bank, the parent company of Stanbic Bank Ghana, have forecast an improved economic performance and narrowing of the current account deficit of the Ghanaian economy this year.

Year-on-year inflation, according to the economists, was expected to be around 9.3 per cent as strong base effects from food inflation continue, while the expected cut in electricity tariffs should also be supportive.

Speaking on the projections for Ghana's economy, Ayomide Mejabi of Standard Bank Research noted that the balance of payment improvement should be supportive of the currency.

"We expect USD/GHS to trade within the forward curve for most of this year, rising only modestly to the 4.75 region by year-end. Our modest depreciation bias is as a result of more supportive Balance of Payment dynamics with the current account deficit narrowing.

He said, "as financial flows remain ample, the current account deficit would probably continue narrowing towards 3.3 per cent of GDP this year from around 4.6 per cent 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."

Beyond an improved balance of payment, he said the research indicated that oil production and the floating of bonds are projected to enhance the country's financial inflows.

"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 said.

He said, "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."

My Ayomide explained that the above mentioned inicators, would continue to strengthen the forex reserves, pushing it higher than the country's current end of year projection of USD5.8 billion (equivalent of 5.1-m of import cover).

He further noted that these indicators were enough to excite interest from investors.

"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 USD 5 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.

Commenting on Ghana's economic outlook for the year, the Head of Global Markets at Stanbic Bank Ghana, Afua Bulley, said the macroeconomic stability achieved over the years coupled with the country's strong balance of payment suggest that the year holds good prospects.

"The prospects are looking good and if the managers of the economy are able to sustain the economic stabilisation programme through a return to strong fiscal consolidation, we are confident that the economy will rub shoulders with economies of Europe and the West," Ms Bulley said.

Ghana

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