Cedi notes
Market analysts at GCB Capital are expressing optimism about the cedi's outlook for the rest of the year, projecting the Ghanaian currency to stabilize by mid-2024.
The cedi has witnessed a rapid depreciation trend since February 2024, primarily driven by sustained corporate forex demand pressures. Despite this challenge, key economic indicators in Ghana signal an improving macroeconomic environment.
Ghana's GDP growth is forecasted to modestly increase from 2.9% in 2023 to 3.3% by the end of 2024, while average inflation is expected to decline from 38% in 2023 to 18% in 2024.
In efforts to bolster the local currency, the Central Bank recently intervened by selling US$13 million in the spot market earlier this week and an additional $20 million to Bulk Oil Distribution Companies (BDCs) in the 51st auction.
Although the cedi experienced depreciation against major trading currencies in the first quarter of 2024, the rate was notably lower compared to previous years.
Courage Boti, lead researcher at GCB Capital, sees recent developments as a source of hope for the cedi's stability in the short term. He attributes this optimism to the improving macroeconomic landscape and the potential for increased forex demand absorption from the Bank of Ghana's auctions.
"In my engagement with the traders, what they see is a pile-up of demands from the corporate sector, largely the BDCs, who are just about more or less 20% of the IFAX needs from the BDCs auction that the Bank of Ghana conducts every fortnight. So, they source the rest from the open markets and also from the other corporate sectors. You could immediately think about things like the seasonal trends that we know from before; dividends repatriation in the second quarter," Boti explained.