Ghana�s exports declined by seven percent year-on-year in the first quarter amid low prices of key export products, gold, cocoa and oil which account for close to 90 percent of exports.
This led to a wide trade deficit of $335 million in the first quarter compared to a near-zero balance in the first quarter of 2012.
�The fiscal performance so far this year suggests a persistence of fiscal pressures, amid challenging domestic and external conditions. Against a target of 3 percent of GDP for the first four months of 2013, preliminary data show that the fiscal deficit came in wider at 3.8 percent, weighed on by a 0.9 percentage points of GDP shortfall in revenues,� reports ABSA Capital in a new survey it undertook with on Ghana.
It said while government was implementing further measures to keep the 2013 deficit in check, there were risks to the 9 percent (of GDP) deficit target for 2013, in its view.
�Given the economy�s weak start to 2013 and considering the challenging external environment, we now expect Ghana�s economic growth to ease to slightly below 7 percent this year against 7.9 percent recorded in 2012.
�Amid ongoing tight monetary policy, the slowdown in credit growth is likely to persist this year and power rationing remains a restraint to output growth.�
Ghana�s oil production, which averaged 104,000 barrels per day in January to early May at the Jubilee Field, is expected to increase to between 100,000 and 110,000 barrels per day this year from an average 72,000 in 2012 (Tullow Oil estimates).
ABSA Capital noted: �Despite the anticipated improvement in oil output, we project the current account balance to remain wide at above 11 percent of GDP this year, with only modest gains expected in gold and oil prices in the next few quarters. Gold output was also weak in the first quarter declining by three percent quarter-on-quarter.�
Furthermore, it noted that even as economic growth is slowing, it expects monetary policy to remain tight through 2013 amid persistent inflation risk.
�Headline inflation (10.9 percent year-on-year and 11.1 percent in May under the old and new consumer price index (CPI) series, respectively) has risen consistently in recent months, largely reflecting part removal of fuel subsidies and a faster-than-usual rises in food prices.
Second-round effects of the removal of fuel subsidies and Ghana Cedi depreciation continue to pose threats to the inflation outlook.
�Despite rising inflation, downbeat signs on the growth outlook could see the Bank of Ghana (BoG) Monetary Policy Committee (MPC) remain on hold in the July meeting in our view. However, with inflation already at the upper-end of the BoG�s 7 to 11 percent year-end target, we believe the tightening bias remains.�
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