"US Recession: $2bn in trade on the line \u2013 Analyst"

" \n US Recession: $2bn in trade on the line \u2013 Analyst \n \n\n \n The possibility of the world\u2019s largest economy \u2013 the United States of America (USA) \u2013 slumping into recession could have a negative bearing on Ghana\u2019s attempt to navigate its current economic downturn, Associate Professor of Finance at the University of Ghana Professor Elikplimi Agbloyor has said. \n \n\n \n Prof. Agbloyor believes that due to close social, political and economic ties, the local economy could suffer and there could be a sharp increase in portfolio reversals as higher rates make US bonds more attractive. \n \n\n \n Furthermore, a pronounced economic slump would lead to a reduction in the level of foreign direct investments (FDIs), imports and remittances from the US. \n \n\n \n Hitherto, analysts had offered divergent views on if the American economy \u2013 which had a value of US$23trillion at the end of 2021 \u2013 was heading toward a recession after it recorded two consecutive quarters of economic contraction. \n \n\n \n The US Gross Domestic Product (GDP) contracted by 1.6 percent on a year-on-year basis in the first quarter of the year and 0.9 percent in the second; a development some market watchers have described as a qualification for the traditional definition of a recession. \n \n\n \n Others, however, have described the economy as \u201cstrong\u201d, arguing that other primary indicators of a recession, such as the unemployment rate, are not high enough to warrant an official declaration. \n \n\n \n But America\u2019s inflation rate for August was higher than expected \u2013 rising by 0.1 percent to 8.3 percent over the past year and leading the Fed to, this week, raise its benchmark rate for the fifth time in 2022 to a range of 3 percent to 3.25 percent. \n \n\n \n Commenting on the development, Prof. Agbloyor maintained that all indications are pointing to a certain recession in the U.S. \n \n\n \n \u201cI think it is likely that the US will experience a recession; it has already experienced a decline in GDP for two consecutive quarters, although it has not technically been classified as a recession,\u201d he noted. \n \n\n \n \u201cThe Fed is also on record to have stated that it does not mind if the economy goes into a recession to fight the record high inflation,\u201d he added. \n \n\n \n American dream fizzling? \n \n\n \n According to data available from the Ghana Investment Promotion Centre (GIPC), FDI from the US for 2021 stood at US$35.26million across 13 projects; a figure likely to dip if the American economy contracts. \n \n\n \n Also, official data from the US Census Bureau suggests that as of end-July more than US$2billion worth of trade had already occurred between Ghana and the United States of America (up from US$1.8billion in 2019) with Ghanaian exports at US$1.56billion and imports at US$661million. \n \n\n \n Top export categories from Ghana include minerals, fuels, cocoa and cocoa products, rubber and allied products, knit apparel, and vegetables. \n \n\n \n Already, the cost of American goods into Ghana has risen sharply on account of the cedi\u2019s rapid depreciation against the US currency, with the former dropping by more than 35 percent from beginning of the year. \n \n\n \n Furthermore, there are heightened concerns about a fall in the value of inward remittances into the country. In 2021, remittances into Ghana stood at US$4.6billion, just under 7 percent of the annual GDP \u2013 with a study from digital cross-border remittance \u2013 WorldRemit \u2013 showing Ghana was the third-highest destination for remittances originating in the US during the period. \n \n\n \n Global \u2018warming\u2019 \n \n\n \n There is now growing concern that the recession will not be regional but global, as central banks the world over continue to raise rates in sync with the World Bank now warning of a possible global slump in 2023. \n \n\n \n \u201cAs central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023 and a string of financial crises in emerging market and developing economies that will do them lasting harm,\u201d the Bank said, following the conclusion of a new, comprehensive study on the subject. \n \n\n \n The World Bank warned that unless supply disruptions and labour-market pressures subside, the interest-rate increases could leave the global core inflation rate (excluding energy) at about five percent in 2023 \u2013 nearly double the five-year average before the pandemic. \n "

"US Recession: $2bn in trade on the line \u2013 Analyst"

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