Ghana’s real GDP to grow faster than projected— Stanchart Report

Razia-KhanStandard Chartered Bank says it expects Ghana’s real Gross Domestic Product (GDP) to grow faster than the country projected in the 2015 budget.

“The authorities forecast 3.9 per cent real GDP growth in 2015. We think growth is likely to be faster than this, albeit more subdued than Ghana’s recent trend,” the bank’s research report has said.

The report authored by the bank’s head of Africa research, Razia Khan, gives the outlook for eight economics in Africa, including Ghana, Nigeria and South Africa.

The report said the completion of domestic gas infrastructure this year should allow Ghana to cut its annual import bill by USD 300-500mn, as it reduces its reliance on imported oil for thermal generation of electricity.

“Credit growth is strong at 26.6 per cent year on year in real terms in September. Consumer and business confidence both rebounded in the third quarter of 2014, following the stabilisation of Ghana’s foreign exchange market.

The report however, said an International Monetary Fund (IMF) deal would be key to Ghana’s prospects in 2015.

It said in the absence of an IMF deal, Ghana might have difficulty meeting its external financing requirements in 2015.

“A deal with the IMF is key to maintaining investor confidence and attracting new investment in local currency bonds. We estimate that Ghana will have GH¢2.2 billion of three-year and five-year local currency debt maturing in 2015, with interest payments of GHS 1.45 billion bringing the total to USD 1.1 billion.

It said, “Much of this is likely to be held by foreigners. Including other short-term liabilities, this will account for a sizeable proportion of existing reserves of USD 5.9bn. The ability to roll over its commitments will be important.”


Market outlook

On the market outlook the report said the sustainability of the cedi at current levels would be key adding “that given a still-high current account deficit, we expect gradual pressure to return to the FX market, as imports normalise once again.”

It said while lower oil prices would help, the high level of domestic debt maturing in 2015 would continue to pressure Ghana’s external reserves.

The report is predicting a GH¢4.20 rate depreciation against the U.S dollar by the end of year.

The report maintained that the GH¢4.20 pesewas could be revised if Ghana secures a programme with the IMF.

“An IMF programme with total funding estimated at .USD 1billion and the unlocking of perhaps USD 1.5 billion from other donors should provide some support, but this will not fully offset pressure on the GHS,” the report said.

In an interview with Times Business on the outlook for the cedi this year Dr. John Gatsi, senior lecturer, University of Cape Coast Business School said any IMF deal would only help in stabilising the local currency.

He said there was the need for the country to diversify its export portfolio in order to rake more foreign exchange to cushion the cedi from depreciating.

Dr. Gatsi said even if the IMF deal delayed there were options that the government could activate and trigger to stabilise the cedi.

Mr. Samuel Kofi Ampah, currency analyst said the pressure being experienced was just normal adding that the cedi would bounce back.

He said fiscal discipline was very important if the pressure on the cedi would reduce.

He urged the Bank of Ghana to come into the market if the demand for the local currency was high. 

By David Adadevoh

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