In spite of government’s projection of real Gross Domestic Product (GDP) at an average rate of 6.2 per cent between 2018 and 2021, researchers at Standard Bank, parent company of Stanbic Bank Ghana, forecast economic growth to remain robust at 7.0 per cent, in 2018.
The April edition of the African Local Markets Monthly report authored by the Bank said the growth is “largely underpinned by increased cocoa export revenues and a peak in oil production.”
“Ghana’s trade balance should receive a boost from increased cocoa export revenues. Since the beginning of the year, cocoa prices have risen by over 40 per cent to around USD2,700/MT as demand-supply dynamics appear to have adjusted to the lower price environment which was prevalent in 2017. Given that imports declined last year, leading to the trade deficit swinging into a surplus, and our expectation of only a moderate rebound this year, the trade balance should remain in surplus and allow further contraction of the current account deficit”, the report said.
Business Finder’s own checks on the world market price of cocoa between January and May, 2018 revealed a 45.56 per cent increase in the price of the cash crop, from an average of $1930/MT in January to an average price of $2,809/MT in May, 2018, representing an increase of $879.25 over the five months.
According to the report “after strong economic growth in 2017, reaching 8.5 per cent year-over-year, we expect growth to remain robust at around 7.0 per cent year-over-year in 2018. The Stanbic Bank PMIs are certainly corroborating this view thus far. The overall PMI reached 55.2 in March from 54.9 in February and 53.5 in March2017 as survey respondents suggested that output levels were rising as consumer confidence and consequently new orders rose. That being said, the oil sector will continue to underpin growth as authorities estimate that production is set to reach a peak of 290k bpd in 2018.”
Rising cocoa prices good for Ghana’s treasury
Commenting on the report, the Head of Global Markets at Stanbic Bank Ghana, Afua Bulley, said the rise in global cocoa prices will have an impact on the country’s treasury. “The recent rise in cocoa prices will have a reasonably positive impact on the fiscus. Unlike in Cote d’Ivoire where the cocoa board reduced prices it paid to farmers, Ghana refrained from reducing prices, thus placing some pressure on the country’s fiscal accounts. The 40 per cent surge in cocoa prices since the beginning of the year should certainly reduce the implied subsidy and alleviate fears of impending fiscal strain”, Ms Bulley indicated.
“We also expect financial reserves to remain buoyant, especially after planned Eurobond issuances that may amount to up to USD2.5billion later in the year. As a result, we now expect reserves to reach around USD6.8billion by year end”, Ms Bulley added.