“Given our forecasts for a narrowing current account deficit, we believe a moderate uptick in FDI into Ghana will lead to an increase in the Central Bank's stock of foreign reserves in the coming quarters. Direct investment will gradually rise in 2018 as financing for the further expansion of oilfields flows into the country,” it explained.
Outlining further, it said, “direct investment had declined in half-year 2017 after major construction work slowed considerably following the completion of the Sankofa gas project and majority of the TEN oilfield development. Now that Ghana is free to develop the rest of the field, we believe an increase in flows of FDI is likely to follow. The combination of a shrinking current account deficit and an uptick in financial inflows will see reserves recover, strengthening Ghana's external position considerably.”
Ghana’s foreign exchange reserves dipped by 13.3 percent from US$ 5.77 billion in June 2017 to US$5.1 billion in August 2017, equivalent of 3.0 months of import cover, Ecobank Research earlier stated.
That notwithstanding, it said, recent signing of a Cocobod loan agreement for USD1.3bn for the 2017/18 season is set to provide a momentary uplift in quarter four 2017.
BMI also predicted that the current account deficit will narrow sharply from 7.2 percent of Gross Domestic Product in 2016 to 3.5 percent in 2017 and subsequently to 1.5 percent of GDP in 2018.
“We are above consensus in this forecast as quarterly data already shows a major shift in trade dynamics in 2017 due to oil export growth. As we expect the rate of expansion in oil production in 2018 to be almost double the rate of 2017, a further significant narrowing of the current account deficit is likely.”
BMI added that over time, easing monetary conditions and lower inflation will see import demand build up, but robust export growth will ensure that this trend remains sustainable. “We believe that Ghana's hydrocarbon export revenues will be boosted by an expansion of production capacity and higher global oil prices, significantly narrowing the current account deficit in 2018”, it explained
Though it expect an uptick in import demand in 2018 due to greater currency stability and easier borrowing conditions, its forecasts for export revenues to increase by 24.6 percent year-on-year mean that it do not expect this to lead to a deeper trade deficit.