…current appreciation unsustainable
As the Ghana cedi begins to appreciate against the US dollar, some market analysts are skeptical the currency can hold its ground, forecasting it to close the year at 4 Ghana cedis 41 pesewas to a dollar.
More alarming, FucusEconomics Consensus, a leading provider of economic forecasts for over 127 economies across the globe, are predicting that the currency will reach 4 Ghana cedis 98 pesewas to a dollar next year.
According to the company, government’s decision to increase foreign inflows from the 1.5 billion dollar Eurobond and the IMF aid deal will only support the currency’s stability in the medium term.
This, the group explained is due to the fact that the Bank of Ghana’s mode of intervention in pumping dollars into the economy is not sustainable.
The group further warned that the move to court international investors by injecting dollars, as well as the decision to raise one and two year domestic debt notes issues to foreigners, may bring foreigners back into the market in the context of routinely under allocating local debt auction amid low appetite by domestic banks.
Even though the Central Bank has declared that a robust interbank intervention will continue in the future to support the local currency, the group has cautioned that the activities of speculators which feed into the demand of the dollar is likely to cause more instability.
Predicting the outcome of other macroeconomic indicators, the group was optimistic inflation will ease in 2016 to 13.1 percent, after it has closed the year 2015 at 15.9 percent.
On economic growth, government’s target of attaining a 3.9 percent expansion, in 2015, may be missed as FocusEconomics panelists are certain the country can make only a 3.4 percent economic growth; which is 0.1 percentage points from its earlier forecast. For 2016, the panel expects GDP to expand to 5.2 percent.
The group expects the Monetary Policy Rate to end this year at 22.14 percent, while it predicts the policy rate for 2016 to end at 20.17 percent.
In July, the cedi rebounded significantly against the US dollar, breaking the depreciating trend that began in January of this year.
The currency gained almost all of its losses this year and traded at 3.46 per dollar representing a 20.28 percent stronger than on the same day the previous month, but still 2.5 percent weaker on an annual basis.
The cedi, in the latter part of August hit GHS4.50 but began to gain some strength at the beginning of September reaching GHS3.65.
