Global economic group FocusEconomics is optimistic Ghana will make some substantial economic gains in the remaining months to end the year 2015.
In its latest report, the group pointed at the 1.0 billion Eurobond loan as well as recent gains in the cedi as major indicators to propel the economy into expansion before Gross Domestic Production (GDP) averages 4.9 percent in 2016.
According to them, government may achieve its fiscal target this year as a result of improved confidence after Ghana received the second tranche of funds under the IMF’s three year extended facility program.
Even though the cedi has lost over 15.0 percent of its value since the beginning of the year, FocusEconomics panelists are optimistic the recent appreciation of the currency reflects expectations of increased foreign inflows in the last quarter of the year as well as the government’s plans to reduce spending.
The group maintained that the gains may translate into investor confidence as market observers anticipate an increase in foreign inflows will stimulate aggregate demand by the last months of 2015.
Recent performance of the cedi
In recent weeks, the Ghana cedi (GHS) has strengthened somewhat against the U.S. dollar trading at 3.71 GHS per US Dollar on October 5.
The result was 2.50 percent stronger than on the same day of the previous month but still 15.4 percent weaker on an annual basis.
The cedi strengthened considerably after Ghana concluded the sale of a USD 1.0 billion Eurobond earlier this month.
There is hope that the IMF will disburse more money to the government, which will in turn ease demand pressure on the market.
Stability in the FX market will go a long way to improve Ghana’s import systems, particularly in the period under review due to trends of high imports of goods during the yuletides.
Revision of inflation target
After revising earlier figures released by the group, FocusEconomics Consensus Forecast panelists expect inflation to average 16.6 percent by close of year while 2016 figure hits 14.2 percent up by 0.2 percentage points and 0.4 percentage points respectively.
In September, consumer prices dropped 0.13 percent over the previous month, which followed the 0.78 percent drop tallied in August.
This marked the lowest reading since October 2012 with September’s drop mainly driven by lower prices for food.
Inflation was stable at the previous month at 17.3 percent in September, remaining well above the Central Bank’s target of 8.0 percent.
Annual average inflation inched up from August’s 16.9 percent to 17.0 percent in September, the highest level since March 2010.
The team further expects the increase of 10 percent in the minimum wage for public sector workers to further push demand up.