Ghana’s exports have had a slower growth since the recovery from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports recovered to USD 15.8 billion in 2021. Ghana has a slightly concentrated export profile and earnings from gold have decreased despite being above the medium-term average, to USD 5.7 billion (approx. 36.2% of total exports) in 2021. Other top exports from Ghana include crude oil and cocoa. These exports contributed USD 6.9 billion (approx. 44.1% of total exports). Ghana’s export earnings from crude oil have continued increasing to USD 4.6 billion in 2021; and earnings from cocoa have continued decreasing to USD 2.4 billion in the same period. Ghana’s trade deficit narrowed, despite being wider than the historical medium-term average of -USD 373.2 million for 2018 to 2020, to -USD 773.7 million in 2021.
Total merchandise export earnings have continued increasing which ameliorated the relieved pressure caused by net FDI inflows (foreign capital being invested domestically). Ghana’s FDI inflows increased to USD 2.6 billion in 2021. Hence, Ghana’s FDI stock has been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 38.6 billion for 2018 to 2020, to USD 41.0 billion in 2021. This bodes well for Ghana as a country that is aiming to attract more foreign investment to develop and diversify its economy away from the reliance on gold exports. This signifies the continued interest in Ghana by foreign investors aiming to take advantage of the growing economic opportunities and progress for the national economic diversification strategy.
Remittances receipts have grown significantly over the period. Personal remittances received have been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 2.8 billion for 2018 to 2020 to USD 3.2 billion in 2021. Personal remittance payments to foreign nationals have also continued increasing from an annual average of USD 783.6 million for 2018 to 2020 to USD 812.8 million in 2021. Ghana has had net remittance inflows (net remittance receipts from the diaspora) which increased to USD 2.3 billion in 2021. This has affected the current account balance and strength of the GHS over the period.
The GHS has continued depreciating. In nominal terms, the GHS depreciated by an annual average of -14.7% against the USD for 2018 to 2020. The GHS depreciated by -25.1% to an annual average of GHS 5.8 per USD in 2021. Ghana’s current account deficit continued widening beyond the historical medium-term average. In 2022, Ghana’s current account deficit continued widening. In particular, Ghana has benefited from the higher commodity prices which continued appreciating due to lower global supply following the sanctions against Russian exports after its military exercises in Ukraine. The global price of gold appreciated by 1.4% to USD 1,825.2 per ounce in 2022 (2021: +1.7%; USD 1,799.8 per oz). However, Ghana has been affected by the higher fuel and food prices which continued appreciating due to lower global supply following the sanctions against Russian. This is also reflected in the projections for Ghana’s current account balance.
In 2023, Ghana’s current account deficit is projected to narrow despite being wider than the historical medium-term average at -USD 3.1 billion (approx. -4.4% of GDP). In the medium-term from 2024 to 2026, Ghana’s current account deficit is projected to widen despite being below the historical medium-term average, to an annual average of -USD 3.2 billion (approx. -4.1% of GDP). This illustrates a gradual improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia on global oil prices. This illustrates a relatively stable and gradual improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia. Nevertheless, gold prices are expected to remain stable as the global commodity for value-storage. Ghanaian authorities will have to take advantage of the current reprieve and invest in further diversification of the country’s exports away from the continued reliance on gold exports.
The issue of diversifying the Ghanaian economy remains an elusive obstacle for the country. Ghana still has a significant potential to grow its exports from crude oil and cocoa. These represent the highest growth potential towards diversifying the Ghana’s economy and export earnings. Apart from this, Ghana should also deepen its integration in the ECOWAS region and increase its intra-regional trade. This will provide an opportunity for Ghana’s exports to compete against goods and services of comparable quality from the ECOWAS region. Moreover, Ghana can offset the risks with its traditional export markets by increasing its dependence on the ECOWAS region for its exports.