Current account to hit 3.8% in 2020 – Fitch Solutions

Ghana’s current account deficit is expected to expand to 3.8% of Gross Domestic Product (GDP) next year.

According to Fitch Solutions, it could have even been worse but thanks to an expected rebound in exports.

This deficit is however larger than the 2.7% projected by the International Monetary Fund for next year. The current account deficit is a measurement of a country’s trade where the value of goods and services imported exceeds the value of products exported.

The research arm of ratings agency, Fitch, said the persistent deficit will constrain the availability of dollars in the economy and ultimately drive further, though more moderate cedi depreciation.

It emphasized that multilateral assistance to fund the country’s trade deficit will become more constrained once the Covid-19 pandemic recedes.

“Multilateral assistance to fund Ghana’s trade deficit will become more constrained once the global Covid-19 pandemic recedes and will also become increasingly conditional on the rebalancing of Ghana’s current account.

“Given that rebalancing the external sector through fiscal austerity will be politically unattractive, we expect the government to partially rely on currency depreciation to curb the country’s current account deficit”, Fitch Solutions added.

Importantly, the widening current account will not have significant impact on the economy as the country’s trade balance continue to remain positive with the nation recording a trade surplus of $1.3 billion dollars in the eight months of this year.

The nation has benefited immensely from a diversified exports which is expected to facilitate its growth rate of about 1.0% in 2020.

Out of 46 Sub Saharan Africa countries, only three countries will record a current account surplus.