Latest data from the Bank of Ghana’s Summary of Macroeconomic and Financial Data for January 2021, indicate that the country’s external sector continues to suffer adversely from the impact of the novel coronavirus pandemic.
According to the data, the value of the country’s total exports decreased to 1.4 billion dollars in 2020, from the $1.5 billion recorded in 2019.
The report also shows a decrease in total imports from $1.3 billion from January to December 2019 to $1.2 billion for the same period in 2020.
Exports and imports for the year under review declined in value by about 7.8 percent and 7.23 percent respectively when compared to the values recorded within the same period last year.
The data from the Central Bank also showed that Ghana recorded a positive balance of trade of two billion dollars as at the end of December 2020.
This was despite the fact that both total exports and imports recorded a decline in value.
Explaining the aforementioned trend in an interview with Citi Business News, Economist with Databank, Courage Martey notes that the general decline recorded across the board can be attributed to the adverse impact of the COVID-19 on the commodities, especially on Brent crude.
“From the numbers, we see that, the main reason for the decline in total exports is as a result of the decline in oil prices especially. Because, if you do a year-on-year check of the fall in oil prices, that is about thirty-five percent decline in the revenue from oil exports. This is coming as a result of the impact of COVID-19 on the commodity market, particularly, crude oil which took its downturn since March and even went very low.”
“Also, 2020 was critical in terms of oil production because we also saw some production shock in 2020 compared to 2019. So, overall, we will say that largely because of the adverse impact of COVID-19 on the commodities market, especially, the oil market, our own domestic production of oil and gas which was lower in 2020 compared to 2019.”
On the imports side, the COVID-induced restrictions slowed down economic activity which also resulted in imports declining because economic activity being robust will also lead to an increase in international trade which has imports as a component of it. So, when economic activity, both globally and domestically, reduces, you will see the impact on imports also falling,” he said.
A further look at the report also shows that as of December 2019, the commodity was selling at 65.2 dollars per barrel.
However, it dropped to 50.2 dollars per barrel in December 2020 representing a year to date drop of 22.9 percent.
The significant drop in the price of oil saw the value of oil exported by Ghana dropping to 2.9 billion dollars as at December 2020 when compared to the 4.4 billion dollars’ worth of oil exported by December 2019.
On account of strong gold prices on the international market, the value of gold exported from January to December 2020 increased to 6.7 billion dollars, from the 6.2 billion dollars recorded in the same period last year, representing a 8.06 percent.
This was despite the marginal decline in the price of gold from October 2020 to December 2020.
Also, the price of cocoa, another major export commodity of Ghana for the period under review, saw an increase from 2.3 billion dollars in December 2020 when compared to the 2.2 billion dollars recorded in December 2019.
Mr. Courage Martey explains the above-mentioned trend emphasizes the need for economic diversification.
“This underscores the importance of economic diversification, because you will look at this situation and compare our situation with Nigeria, Angola, South Africa who are very concentrated on one commodity. But in Ghana, our highest concentration in a single commodity is in not only in Gold. Thankfully, when there are uncertainties in the global economy, gold becomes the store of value for a lot of investors, so you see safe-haven demands pushing it into gold and help gold prices become stronger.”
“And that is the reason why gold gives us a lot of revenue in 2020, largely because of the uncertainties brought about by COVID-19. That helped us as an exporter of gold. But also because we are not heavily concentrated on gold beyond the levels that we must. We have some revenue also coming in from cocoa. So, the decline in oil price for the year 2020 was mitigated by some windfall from gold as well as cocoa,” he added.