Cedi To GHS1.4000/US$ By End-2009

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Our call for resumed weakening of the Ghanaian cedi is playing out, and further significant losses lie ahead. The currency traded at GHS1.2110/US$ at one point on December 1. We are targeting GHS1.2200/US$ by end-08, followed by 12.9% depreciation to GHS1.4000/US$ by end-09. Downside pressure stems primarily from the gaping current account deficit, although lacklustre investment inflows will also contribute. We are forecasting a current account deficit of US$2.7bn (18.5% of GDP) in 2009, believing that weak prices for cocoa and gold will weigh on Ghana's external position. Inflows to the capital and financial account are likely to be insufficient