The Economist Intelligent Unit (EIU) has indicated the cedi will continue to lose value against major trading currencies, especially the US dollar, due to uncertainty over the 2020 general elections and low confidence in the financial sector.
In its country report on Ghana for May, the EIU said the cedi will further depreciate by at least 4% (using the present interbank forex rate of GH¢5.10) in the course of the year, averaging GH¢5.31 to $1.
The report adds that the same trajectory will continue, mostly because of increased government spending in 2020—the election year—pushing the local currency to experience close to 13% depreciation, hitting GH¢5.86 to US$1 on average in the course of the year.
“The cedi weakened sharply over the first quarter of 2019, driven predominantly by large current account and fiscal deficits, low confidence in the financial sector, and increased political uncertainty before the 2020 elections.
These dynamics will maintain downward pressure on the currency, with the cedis depreciating to GH¢5.31:$1 on average in 2019
“These dynamics will continue in 2020, with increased spending ahead of the election; we forecast that the cedi will depreciate to GH¢5.86:$1 on average over the year.
“Domestic and global sentiment will improve in 2021-23, but we expect the cedi to depreciate further as the strong dollar and Ghana’s relatively weak domestic economic picture continue to weigh on the currency – although higher export revenue from increased oil earnings will provide some relief. We forecast that the cedi will weaken to an average of GH¢6.50:$1 in 2023,” the report said.