Ghana to record current account deficit of 4.0% in 2023, 0.4% lower than 2022 – Fitch Solutions

Fitch Solutions, is predicting a narrow current account deficit of 4.0% of Gross Domestic Product (GDP) for Ghana in 2023, from 4.4% recorded in 2022.

This is expected to impact positively on the value of the Ghana cedi.

However, it will be subject to improve fiscal position of the country such as prudent spending, significant revenue growth and sustainable debt levels.

The country has been recording trade surplus since 2018,  but capital flight as a result of high-interest payments and sell-offs of the country’s bonds by foreign investors had triggered a weak current account position.

Senior Country Risk Analyst at Fitch Solutions, Mike Kruninger said a healthy production growth for Ghana’s most prominent exports – gold, oil and cocoa – will prop-up export growth in 2023.

“We project that the current account deficit has widened notably in 2022 on the back of large primary income outflows caused by elevated increase payments on Ghana’s external debts. But we expect a very slight improvement in 2023. Indeed, we’ve forecast a current account deficit will reach 4% of GDP in 2023 from 4.4% in 2022”.

“So what is the key reason behind this improvement? As I already mentioned, we focus on healthy production growth for Ghana’s most prominent exports – gold, oil and cocoa which will prop up export growth this year?”, he mentioned

As of October 2022, Ghana had registered a trade surplus of $1.036 billion, about 1.5% of GDP. Total exports for the 10 months of 2021 was estimated at $12.21 billion, whilst total imports was estimated at $11.17 billion.

Mr. Kruninger pointed out that import growth will be weak on the back of slowing domestic demand, given high prices of goods and services as well as elevated taxes.

“We believe that import growth will be weak on the back of slowing domestic demand, given still elevated inflation and the prospects of higher taxes. This will put downside pressure on demand for imported consumer items and imported capital goods and this improves the overall trade balance”.