Ghana’s current account deficit projected to widen in 2022, as Nigeria records its first surplus in 2 years
Fitch Solutions has projected that Ghana’s current account deficit would widen slightly from an estimated 2.6% of GDP in 2021 to 2.9% in 2022.
The Fitch report, a copy of which was obtained by Business Insider Africa, explained that the widening would be caused by sluggishness in the West African country’s oil and cocoa production.
Also, an expected increase in local demand for imported goods would lead to a narrowing of Ghana’s goods trade surplus from $1.8 billion in 2021 to $1.0 billion in 2022.
According to Investopedia, a country’s current account deficit widens when its exports are unable to grow at the same pace as its import volumes. This is the same challenge that Ghana’s neighbour (Nigeria) experienced for two and a half years until it was able to record a surplus of $3.68 billion in Q3 2021, according to checks by BI analysts.
But Ghana’s situation is not hopeless. Fitch Solutions noted in its report that the country will be be able to manage the challenge thanks to an expected increase in remittances, earnings through tourism and portfolio inflows.
“That said, this 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. Meanwhile, we expect increased financial account inflows as a result of increased investment in gold mining, and an uptick in portfolio inflows, will continue to cover the widening of the current account deficit in the coming quarters, ensuring Ghana’s external position remains stable in the years ahead,” part of the report said.
Do note that in a recently published paper titled “Current Account Deficits and Sustainability in Africa: Evidence from Cointegration Approach” economics professor Eugene Kouassi established that current accounts are weakly sustainable in 45% of African economies and absolutely unsustainable in 8% of African economies.
