Trade balance improves by 12.8 % in October

The trade balance has gone up by 12.8% between September and October this year. Recent Macroeconomic and Financial Data released by the Bank of Ghana shows that the Trade balance has gone up from US$1,545.6 million in September to US$1743.6 million in October 2020. This means that total exports have outweighed imports by US$198 million in October this year.

The trade balance as of October 2020 accounted for 2.6 % of the country’s GDP as compared to 2.3% recorded in September. 

The trade balance recorded in October was as a result of the fact that total exports value for October stood at US$12,001.3 million compared to total imports of US$10257.7 million. The splendid performance of the exports in October was driven mainly by the rise in Gold Exports from US$5,004.9 million to US$5729.6 million.

The Bank of Ghana stated that Gold prices have been largely supported by accommodative monetary policy, increased uncertainty, and the global economic slowdown due to COVID-19.

Non-Oil Imports are the major component of the total exports in Ghana, increasing from US$7901.7 million in September to US$8775.2 million in October 2020.

The country’s trade balance has seen great improvements since June this year. This suggests that Ghana exports more than it imports within this period.  

Year-on-year analyses show that the trade balance has improved by US$252 million from US$1491.6 million (2.2% of GDP) in October 2019. This represents a year-on-year growth of 16.9% within the period under review.

The trade balance has however reduced by a million US$513.2 million from US$2256.8 million (3.4% of GDP) recorded at the end of December 2019. This shows a year-to-date deterioration of 22.7% of the country’s trade balance.

The improvement in the country’s trade balance shows the rebound of the economy as a result of the easing of COVID-19 restrictions across the globe as indicated by the Bank of Ghana. After contracting in March, April, and May, the real Composite Index of Economic Activity (CIEA) recorded an annual growth of 10.5 percent in September 2020, compared with 4.2 percent growth a year ago.

The central bank suggests that the key drivers of economic activity during the period were construction activities, manufacturing, and credit to the private sector. Also, the Purchasing Managers Index (PMI) which gauges the rate of inventory accumulation by managers of the private sector and also captures dynamics in economic activity has increased significantly between September and October 2020.

Bank of Ghana stated in its MPC press briefing that the CIEA outturn for October 2020, improved consumer and business confidence, and strong liquidity flows have helped to deliver a faster than expected recovery in economic activity.

Consumer confidence was firmly above pre-lockdown levels supported by rebounding economic activity following gradual relaxation of COVID-restrictions. Though below pre-lockdown levels, business confidence has shown a steady and gradual recovery supported by improved company prospects and steady demand for goods and services.

The central bank further states that these flows include payments to contractors, SDI depositors, clients of SEC licensed fund managers, micro and small business loans provided by the government through the National Board for Small Scale Industries, and the policy and regulatory reliefs to banks and SDIs. Based on these observations, the Bank maintains that growth will perform better than earlier projected.