Cedi to average GHS 11.40 to $1 in 2023; average GHS 10.90 to $1 in 2024
Fitch Solutions’ Country Risk team forecasts the average exchange rate to weaken from an estimated GHS 8.3/$1 in 2022 to an average of GHS 11.4/$1 in 2023 and GHS 10.9/$1 in 2024.
Fitch Solutions made the assertion in its recently published Ghana Consumer Outlook Report.
The research firm asserts that the weakness of the cedi is making imports more expensive, placing additional pressure on household budgets and contributing to high inflation.
The current exchange rate of the dollar to the cedi on the spot market (as of the time of this report) is GHS 11.48 to $1.
According to Fitch Solutions in its Ghana Consumer Outlook Report, it forecasts that real household spending (at 2010 levels) to decelerate to 2.0% y-o-y.
While growth will pick up over 2024, averaging 4.0% y-o-y, risks will remain weighted to the downside, with stubbornly high levels of inflation and fiscal consolidation policies weighing on real purchasing power gains for many consumers in Ghana.
Adding that, the forecast for consumer spending growth in Ghana over 2023 and 2024, is in line with its Country Risk team’s forecast that economic growth in Ghana will decelerate to 3.0% y-o-y in 2023 before rising to 3.7% y-o-y over 2024.
Despite the deceleration, household spending is set to reach GHS107.8bn in 2023, higher than the GHS101.9bn posted in 2019, pre-Covid. Over 2024, spending will expand to GHS112.1bn.
Meanwhile, Fitch Solutions notes that elevated levels of household indebtedness in Ghana persist as a looming peril to the nation’s consumer spending outlook.
This predicament not only restricts future access to credit but also exerts undue pressure on current disposable incomes.
A confluence of factors, including rapid interest rate hikes by the central bank during the 2022-2023 period, has culminated in interest rates previously uncharted by most households in the past decade.
Regrettably, there are scant indications of imminent rate reductions, signifying that households will be ensnared in an environment of protracted high debt servicing costs.
Furthermore, a considerable number of households eagerly embraced substantial debt burdens in the preceding era of low-interest rates. While there are limited indicators of these debts going sour, the conundrum lies in the possibility that servicing this debt at elevated interest rates may place an unexpectedly heavy burden on household disposable incomes.
There looms a risk that consumers may be compelled to curtail spending, particularly in non-essential sectors, as the cost of servicing debt at higher interest rates escalates.
