Fitch Solutions says the current account stability will mitigate any downside pressure on the Ghana cedi, despite souring investor sentiment towards Emerging Market assets.
According to the UK-based firm, strong export receipts will continue to bolster Ghana’s already robust forex reserves, which have risen to US$14.4 billion, the equivalent of roughly six months of imports.
“In the event that investor sentiment toward Ghana weakens – an outcome for which there is currently little evidence, given Ghana’s stable dollar bond yield spread over South Africa – the central bank would retain sufficient reserves to intervene in the interbank market and contain excessive market volatility”.
That said, it said policymakers are likely to tolerate a modest depreciation bias to support export competitiveness, particularly as the cedi appears overvalued on a real effective exchange rate basis. “Overall, we expect broad currency stability with a slight depreciation bias, with the cedi ending the year at GH¢11.4 to one US dollar.
Risks To Outlook
It said there is a possibility that its current projections for the Middle East conflict prove overly optimistic and that the war persists longer than anticipated.
In such a scenario, it stressed that global energy prices would rise further and remain elevated for longer, increasing the likelihood of global supply‑chain disruptions. “In Ghana, this would translate into stronger inflationary pressures and a weaker outlook for household consumption. Nevertheless, we expect the transmission channels identified above to remain unchanged”.
It concluded that Ghana’s external position would remain resilient to the shock, while pressures on the fiscal account would likely remain limited, even as the growth outlook deteriorated.
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