Let’s protect our fragile economy
Ghana's economic prospects are delicately balanced between the dynamics of global commodity markets and the discipline of domestic policy management.
A recent warning from Fitch Solutions that a sharp decline in global gold prices could severely weaken the cedi, surge inflation and interest rates, serves as a reminder of the vulnerability of our economy to external shocks.
As we all know, Ghana's foreign exchange reserves have recently benefitted from strong gold exports amid record-high prices. The mineral has played a critical role in stabilising the cedi and anchoring inflation expectations.
However, Fitch's warning highlights the risks associated with our reliance on gold exports. A drop in global gold prices, potentially triggered by changes in US trade policies or easing geopolitical tensions, could severely weaken our external buffers and renew downward pressure on the cedi.
For the Graphic Business, the potential consequences of such a scenario are dire. A weaker cedi would lead to higher inflation, which would erode the purchasing power of households and reduce the competitiveness of our businesses.
For us, higher interest rates would also increase the cost of borrowing, making it more difficult for businesses and individuals to access credit. This would have a negative impact on economic growth and development.
On the other hand, a stronger cedi would accelerate the disinflation process, enabling the Bank of Ghana to ease interest rates earlier than currently projected. This would support private consumption and stimulate credit growth across the economy.
Stronger private consumption, driven by currency stability and lower inflation, would create positive spillovers for domestic demand.
The credibility of macroeconomic management and the country's ability to shield itself from external shocks will be critical in sustaining investor confidence. Policymakers must continue to implement structural reforms and maintain fiscal discipline to build resilience and promote economic growth.
The recent revision of Ghana's 2025 real economic growth forecast from 4.2 per cent to 4.9 per cent by Fitch Solutions is a positive development. The stronger-than-anticipated quarter one 2025 results, driven by stronger agricultural output and mining sector performance, are a testament to the potential of our economy.
However, we must remain cautious and vigilant. The uncertainty around US President Donald Trump's trade policies and the ongoing geopolitical tensions pose significant risks to our economy. We must continue to implement policies that promote economic diversification, improve our business environment and increase our competitiveness.
In conclusion, Ghana's economic outlook is delicately balanced between commodity price dynamics and policy discipline. While we have made progress in recent times, we must remain vigilant and continue to implement policies that promote economic growth and development.
By doing so, we can build a resilient economy that can withstand external shocks and promote prosperity for all Ghanaians.