Economy of Ghana Cedi to gain strength against dollar - Fitch

Fitch is predicting that an end-year rate of GHC4.33 against the US dollar. For 2018, it is projecting GHC4.19 against the US dollar.

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Fitch has predicted that the local currency, the cedi, will appreciate against the US dollar for the rest of the year.

According to the agency, this is because the economic growth outperforms earlier estimates.

Fitch is, therefore, predicting that an end-year rate of GHC4.33 against the US dollar. For 2018, it is projecting GHC4.19 against the US dollar.

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“The cedi is likely to begin a gradual appreciatory trend from H217 (second half of 2017) onwards due to relatively high real interest rate and significant expansion in Ghana's oil and gas production that will support real GDP growth. Given the country's high nominal interest rate, we are forecasting significant strength in total return terms,” BMI stated in its latest report.

“We forecast a gradual short term appreciatory trend for the cedi, expecting the currency to strengthen from its average for the year to date of GHC4.38/USD to an annual average of GHC4.33/USD for the full year.”

The cedi is currently trading at GHC4.39 against the US dollar on the interbank forex market and at about GHC4.45 at the forex bureau.

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In the long-term, BMI also indicated that the continuous Cedi depreciation will end and allow for a gradual appreciation in the years ahead.

On risks, it said “the most significant downside risk to our forecast is if Ghana's disinflationary trend reverses. A key part of our forecast is that real interest rates will remain relatively high compared to the US as inflation in the former continued to fall. Any shock, such as a major outbreak of army worms or a major uptick in the destruction of agricultural land by illegal miners, could see food price inflation interrupt the current disinflationary trend.”

Another potential risk it could come from some challenges emerging with the IMF over the ECF.

“If the facility ends ahead of schedule or if the IMF releases a negative statement on Ghana's finances, this may create depreciatory pressure,” it added.

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