Dr Henry Wampah, BoG Governor

“The cedi is likely to remain under pressure as the government seeks to meet its foreign reserve targets under the IMF programme”, experts from global economic group, FocusEconomics have warned, pointing to a possible fiscal disintegration that may alter gains achieved in Ghana’s Monetary Policy.

The consensus team further warned that unstable macroeconomic conditions such as high interest rates and inflation could derail gains made in the local currency despite improved confidence in the policy outlook as result of the IMF fund in September.

FocusEconomics is a leading provider of economic analysis and forecasts for 127 countries in Africa, Asia, Europe and the America; publishing timely and accurate business intelligence from a variety of industries including world’s major financial institutions, multinational companies and government agencies.

According to the group, while the cedis’ appreciation in October has helped to pull down inflationary pressures, there are some pointers that are still quite elevated, mainly due to the high volatility in the exchange rate market.

“Persistent electricity shortages, weak commodity prices, a volatile exchange rate and high inflation will continue to weigh on growth” they opined.

This, they explained must be corrected by government deploying a fiscal consolidation policy to realign other macroeconomic variables such as interest rate and investment to stimulate growth in the private sector.

They maintained that despite the Bank of Ghana’s (BoG) optimism in a robust interbank intervention that would support the cedi, the lost in value of over 15.0 percent since the beginning of the year was alarming.

“Though the Bank of Ghana (BoG) has tightened monetary policy significantly in 2015 the move may reflect in influencing inflation trend down into single digits in 2H 2016”, the team predicted.

“Having slowed significantly in 2015, we expect growth to recover only slowly in 2016 given the policy environment and uncertain political climate”, they added
More alarming, the group expects the cedi to end 2015 at 4.15 Ghana cedi per US dollar ,while the panel sees the currency trading at 4.77 GHS per US dollar in 2016.

As at Friday the 30th of October 2015, the cedi was selling at 3 cedis 88 pesawas to a dollar at some forex bureaus in the capital.

Real sector performance
In the second quarter, GDP expanded 3.9 percent over the same quarter last year. The figure marked a deceleration over the revised 4.3 percent growth observed in the previous quarter. The second quarter result marked the slowest increase in a year.

The expansion in the second quarter was mainly driven by an increase in industry that expanded an impressive 15.3 percent over the same quarter of last year (Q1: +3.4% year-on-year).

In addition, the services sector accelerated from a 4.1 percent increase in quarter one to a 5.3 percent rise in quarter two.

Conversely, agricultural production swung from a 3.6 percent expansion in the first quarter to a 0.1 percent contraction in the second quarter, thus recording the first decrease in four quarters.

Even though the government expects the economy to expand 3.5 percent, FocusEconomics Consensus Forecast panelists project that the economy will grow 3.3 percent in 2015, which is unchanged from last month’s forecast.

For 2016, the panel expects GDP to expand 4.9 percent, which is also unchanged from last month’s estimate.

Monetary sector performance
In September, consumer prices dropped 0.13 percent over the previous month, which followed the 0.78 percent drop tallied in August, which had marked the lowest reading since October 2012.

September’s drop was mainly driven by lower prices for food. Inflation was stable at the previous month at 17.3 percent in September.

As a result, inflation remains well above the Central Bank’s target of 8.0 percent, with annual average inflation inching up from August’s 16.9 percnt to 17.0 percent in September, the highest level since March 2010.

FocusEconomics Consensus Forecast panelists expect inflation to average 16.6 percent in 2015, which is up 0.2 percentage points from last month’s forecast.

The panel sees inflation averaging 14.2% in 2016, which is up 0.4 percentage points from last month’s estimate.

Methodology of FocusEconomics
FocusEconomics Consensus Forecast reports cover economic forecasts for over 1,600 unique indicators in 127 countries. Every monthly report includes the Consensus Forecast for each indicator.

The Consensus Forecast, based on an average of the forecasts provided by the most reputable economic research authorities in the world, is the one number you can rely on to make important business decisions.

Consensus forecasts are mean averages of projections of economic forecasters surveyed by FocusEconomics for the monthly publication.
Quarterly averages may not correspond to the annual figures due to different forecast panels.

The GDP-weighted averages for the regional aggregates refer to economies surveyed by FocusEconomics on a monthly basis, and include countries 13 countries in Sub-Saharan Africa.

The countries are Angola, Botswana, Cote d’Ivoire, Democratic Republic of the Congo, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Africa, Tanzania, Uganda and Zambia.

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