Ghana: World Bank disagrees with Fitch Solutions’ 2.9% current account deficit
Ghana’s current account deficit as a percentage of GDP, the World Bank has said will widen to 4.2% in 2022.
According to the Bretton Wood Institution, it expects the country’s current account deficit to remain elevated through to 2024.
The World Bank asserts the country’s current account deficit will be driven by high external financing needs.
“The current account deficit is expected to widen to 4.2 percent of GDP in 2022 and to remain elevated through to 2024, driven by high external financing needs associated with debt service declines in oil export volumes and the services trade deficit,” averred the World Bank.
The World Bank’s projection of a 4.2% widening of current account deficit for Ghana is contrary to an earlier projection of 2.9% current account deficit by research agency, Fitch Solutions.
Fitch Solutions forecasted that Ghana’s current account deficit will widen, albeit modestly, from an estimated 2.6% of GDP in 2021 to 2.9% in 2022 as rising vaccination rates boost household confidence and demand for imports, narrowing the country’s goods trade surplus.
The current account deficit, it further noted, will be partially offset by an uptick in remittances, increasing the secondary income account surplus, while stronger tourism will see the country’s services trade deficit narrow.
“Indeed, our forecast implies that while the country’s current account deficit will expand in 2022, it will remain small compared to Ghana’s five (-3.4% of GDP) and 10 year (-5.8%) pre-pandemic averages,” it added.
Current account deficit widens by $400m in 2021
Ghana’s current account deficit widened by $400m reaching $2.5 billion at end-2021 from the end-2020 figure of $2.1 billion.
According to data made available by the Bank of Ghana (BoG) in its Monetary Policy Report for January 2022, higher investment outflows arising from increased interest payments and dividend repatriation resulted in the widened current account deficit.
“Developments in the trade account, together with higher investment income outflows arising from increased interest payments, profits and dividend repatriation, resulted in a widened current account deficit of US$2.5 billion at the end of 2021, compared with US$2.1 billion recorded at the same time last year,” it stated.
The BoG in the repost asserts that it expects a further deterioration in the country’s current account deficit driven by lower trade surplus and higher outflows in the investment and services account.
“Initial projections under the baseline scenario suggest a drawdown in reserves in 2022 based on a projected widening in the current account deficit and lower inflows into the financial account. The expected deterioration in the current account will be driven by a lower trade surplus, and higher outflows in the investment and services account,” the BoG averred.
