Trade surplus to widen to 4.4% of GDP in 2022

Despite the current poor economic situation and predictions of a worse situation due to further depreciation of the cedi and high inflation rate, Fitch Solutions believes elevated global commodity prices will cause Ghana’s trade surplus to widen to 4.4% of GDP in 2022 from 1.4% in 2021.

Ghana recorded a trade surplus of $1.43 billion in the first half of this year, higher than the $886 million recorded during the same period last year.

This is equivalent to 2% of Gross Domestic Product.

According to the Bank of Ghana’s Summary of Economic and Financial Data, the country bagged $9 billion in the first six months of this year, triggered by increases in gold and crude oil exports.

According to Fitch’s ‘Ghana’s weak external position to strengthen on expected IMF deal’ report, this is because supply disruptions and riskoff sentiment following Russia’s invasion of Ukraine have increased prices of crude oil and gold – Ghana’s two leading export commodities – and in turn Ghana’s export earnings.

“We expect gold production to expand by a healthy 4%, supported by the start of new gold mining projects and the integration of artisanal miners into Ghana’s formal gold mining sector,” the report stated.

From a volume perspective, however, Fitch projects that a decline of 1.3% in oil output in 2022 indicates that Ghana will not be able to reap the full benefits of elevated energy prices.

“Taking these dynamics into account, we project merchandise exports to increase by a robust 26.9% over 2022, up from 1.8% in 2021.”

Fitch, on the contrary, asserts that the positive impact of a larger trade surplus will be partly offset by a widening primary income deficit.

The research company expects external borrowing to continue, further increasing already high interest payments over 2022 and causing the primary income deficit to widen to a forecast 8.2% of GDP, from 4.8% in 2021.

Furthermore, Fitch is forecasting that the current account deficit will widen to 3.5% of GDP in 2023.

The report explained, “While the trade surplus will remain sizeable by historical standards, it will narrow slightly to 4.2% of GDP on easing oil and gold prices. We forecast merchandise import growth of 4% to outpace export growth of 1.4%, as moderating price pressures will gradually improve financial conditions for households and businesses, increasing demand for imported goods and services.”