Fitch Solutions has projected Ghana’s services exports to experience a massive increase this year as the global economy continues to open up for businesses and trade to flourish.
According to Fitch Solutions, services exports will rise by 25.1% in 2022, as increased demand for imported business and financial services surge. Fitch Solutions stated in its recent report that Ghanaians will continue to move abroad as a result of the reopening of borders, a situation that will boost remittance inflows into the country.
The research arm of ratings agency, Fitch, stated that it anticipates an increase in foreign direct investments in the coming quarters, as gold mining companies such as GoldFields and Newmont invest in production capacity.
Despite that, the research arm of the ratings agency, Fitch, iterated that the country’s current account position will expand but marginally in 2022, though it will not be in the same category, five or more years ago. “That said, the widening of the external account position will be tempered by stronger tourist arrivals, narrowing the services trade deficit from $4.8 billion in 2021 to $4.3 billion in 2022”, Fitch Solutions stated.
Fitch Solutions also forecast a strong rebound in Remittances to Ghana which are expected to grow to about $4.5 billion in 2022, still attributed to the extent of recovery in the global economy. According to World Bank’s 2021 Migration and Development report, Remittances to Ghana shot up by 5% to $3.6 billion in 2020, making Ghana the second largest recipient in Africa, behind Africa’s most populous nation, Nigeria.
Current Account deficit to widen
Meanwhile, Fitch Solutions still maintained that despite the anticipated rebound in the global economy, the country’s Current Account deficit will widen albeit modestly, from an estimated 2.6% of the size of the economy in 2021 to 2.9% in 2022.
Data from the Bank of Ghana show that Ghana’s total exports amounted to US$2.7 billion in February 2022, a growth of 5.5 percent year-on-year, compared with US$2.6 billion as at February 2021. The jump in export receipts was driven mainly by a 35 percent increase in crude oil exports, benefitting from price effects as volumes declined. Other exports, mainly non-traditional exports, also registered an increase of 27.2 percent during the period.
However, consistent with a pick-up in economic activities, imports grew by 7.9 percent to US$2.3 billion in February 2022 compared with US$2.2 billion same period last year. The growth was reflected mainly in oil and gas imports (primarily refined petroleum products), which went up by 80.1 percent year-on-year, according to the Bank of Ghana.
The developments in exports and imports translated to a lower trade surplus of US$404.9 million in the first two months of 2022, compared with US$432.7 million in the first two months of 2021.
Consistent with the latest forecast by the research arm of Fitch ratings, the Bank of Ghana warned in its last review of developments in the domestic and global economies that “Looking ahead, these trends, together with developments in the services and income account, will likely result in a widening of the current account deficit by the end of the first quarter”.
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