International research agency, Fitch Solutions has projected that Ghana will record a current account surplus in 2023.

It also noted that the country's trade surplus will remain high however, the current account will run into a deficit in 2024.

Read Fitch's full release on August 15, 2023, below

Key View

We forecast that Ghana will record a current account surplus of 1.3% of GDP in 2023, from a deficit of 2.1% of GDP in 2022.

The trade surplus will remain large by historical standards in H223, as imports will contract more sharply than exports due to weak domestic demand.

In 2024, we project that the current account balance will slip back into deficit, to a shortfall of 0.2% of GDP, as imports recover while exports will record sluggish growth due to a projected moderation in global gold and cocoa prices.

We forecast that Ghana will record a current account surplus of 1.3% of GDP in 2023, from a deficit of 2.1% of GDP in 2022. It will be the first time in 20 years that Ghana records a full-year current account surplus. Our 2023 forecast, which marks a revision from our previous projection that Ghana’s current account balance would post a deficit of 0.9% of GDP, follows weaker-than-anticipated import growth in H123.

Indeed, merchandise imports contracted by 13.0% y-o-y in H123 as a result of weak domestic demand and lower global commodity prices. Meanwhile, exports fell by 7.2%, pushing up the trade surplus to USD299.6mn, from USD245.7mn in H122. Data released by the Bank of Ghana (BoG) shows that the overall current account balance posted a surplus of USD0.8bn in H123, compared to a deficit of USD1.1bn in the corresponding period of 2022.

Current Account Set To Record First Surplus In 20 Years

Ghana - Current Account Balance, % Of GDP (LHS); Quarterly Current Account Balance, USDbn (RHS)



We expect that the trade surplus will remain large by historical standards in H223. Imports will continue to contract as domestic conditions remain weak. Indeed, inflation – which averaged 46.2% y-o-y in H123 – will remain elevated over the coming months, averaging 40.6% through 2023, the highest annual rate since 1996. This will weaken purchasing power of households and constrain demand for imported consumer products.

Meanwhile, restrictive monetary conditions will curtail the ability of businesses to fund their growth initiatives and will lead to a delay in corporate expansion plans, limiting demand for imported capital inputs. Furthermore, we believe that global oil prices will average roughly USD80 per barrel (/bbl) in H223, below the USD93/bbl in H222, deflating Ghana’s import bill (mineral fuels account for 5-10% of total imports). All told, we project imports to contract by 10.0% in 2023, from growth of 7.3% in 2022.

Weak Domestic Demand And Lower Oil Prices To Weigh On Imports

Ghana - Growth In Total Domestic Demand, % (LHS); Global - Brent Crude Price, USD/bbl (RHS)



While export growth will also remain in contractionary territory in H223, the decline will be less pronounced than imports. The moderation in global energy prices will weigh on Ghana’s crude exports (which account for roughly 30% of total exports), but this will be partially offset by healthy growth in gold and cocoa exports. Indeed, efforts to integrate artisanal miners into the official production figure as well as Asante Gold’s recommissioning of the Bibiani gold mine in mid-2022 will keep growth in gold production solid at a projected 8.1% in 2023, providing tailwinds to exports.

Meanwhile, the value of Ghana’s cocoa exports will be inflated by a significant rally in cocoa prices due to adverse weather conditions in neighbouring Côte d’Ivoire (the world’s largest cocoa producer) and concerns about El Niño, which is typically associated with drier weather conditions in West Africa and can weaken cocoa production. Taking these various dynamics into account, we project export growth to contract by 8.7% in 2023, from growth of 18.7% in 2022.

High Cocoa & Gold Prices Will Limit The Decline In Exports

Global - Cocoa & Gold Prices (LHS); Ghana - Merchandise Trade, USDmn (RHS)



A collapse in external interest payments will more than halve the primary income deficit in 2023. After Ghana defaulted on its external debt in December 2022, primary income outflows fell to USD0.7bn in Q123 (latest available data) from USD1.4bn in Q422. Given our expectation that Ghana will only reach a debt deal with its external creditors under the G20 Common Framework in H224, most external interest payments will remain on hold over the coming months. This informs our forecast that the primary income deficit will shrink to 2.8% of GDP in 2023, from 6.1% of GDP in 2022.

Income Balance Narrows On Suspension Of External Debt Servicing

Ghana - Primary Income Balance, USDbn



Current Account Deficit Returns In 2024

We believe that the current account balance will slip back into deficit in 2024, to a shortfall of 0.2% of GDP. This will be primarily driven by a sharply narrowing trade surplus.

Indeed, we expect that imports will start to recover in 2024. Inflation will continue on a downward trend to an average of 18.2% next year, gradually improving household spending and increasing demand for imported consumer items. Meanwhile, we expect that the Bank of Ghana will cut interest rates by 600 basis points to 22.00% through 2024. This will boost business activity from H224, and thus increase demand for imported capital products. Furthermore, our Oil & Gas team projects that the price of Brent crude will average USD83.0/bbl next year – from an average of USD80.0/bbl in 2023 – putting upside pressure on import growth. Overall, we forecast imports to expand by 12.0% in 2024.

The recovery in exports will be much slower. While we project healthy growth in hydrocarbon exports due to rising energy prices and increasing crude production, this will be offset by a weak outlook for gold and cocoa exports. As growth in developed markets picks up in 2024 and risk sentiment improves, our Commodities team projects gold prices to fall by 5.1%, weakening the value of Ghana’s gold exports next year. Meanwhile, as concerns surrounding El Niño fade through 2024, our Commodities team also forecasts a weakening of 7.4% in global cocoa prices, reducing the value of Ghana’s cocoa exports. All told, we forecast exports to grow by just 0.8% next year, and therefore expect the trade surplus to decline from 3.7% of GDP in 2023, to 1.4% in 2024.

Capital Inflows To Gradually Improve

Ghana - Capital & Financial Account Balance, USDbn (LHS) & Direct Investment, USDbn (RHS)



We expect that Ghana’s overall balance of payments will return to surplus in 2023 and 2024, following a record-wide deficit of USD4.6bn in 2022. In 2022, Ghana recorded its first full-year capital and financial account shortfall (of USD3.1bn) in 20 years, as a result of rising investor concerns about Ghana’s debt dynamics and monetary tightening in developed markets. However, the capital and financial account will likely turn positive again in 2023 as the country receives two IMF disbursements of USD0.6bn each under its Extended Credit Facility. The overall balance of payments will be strengthened in 2024 due to an expected improvement in investor sentiment as Ghana makes progress regarding the restructuring of its external debt. This will boost capital inflows and largely offset the small current-account deficit in 2024.

Risks to Ghana’s external position remain significant, however. If negotiations between Ghana and its external creditors stall, investor confidence would weaken, likely triggering another round of capital flight. This would lead to greater pressure on the country’s foreign exchange reserves and the Ghanaian cedi, keeping inflation higher for longer – which would have negative implications for economic growth and social stability.