US Treasury Secretary, Steve Mnuchin, last month surprised a lot of people by suggesting that a weak dollar was good for the USA because it promotes exports. Many economists would argue that Mnuchin is largely right but still, the overt promotion of a weak dollar is something quite unusual coming from a high level US government official.
Whether it is official US government policy or not, the dollar has been weakening over the last year. This usually means good news for commodities, as I explained in this post.
Ghana’s two largest export earners last year, gold and oil, are surging and are preventing the country from fully feeling the impact of the continued weakness in cocoa prices.
With volatility returning to US stocks, there is the chance that emerging markets (such as Ghana) will become more attractive to investors. Even cryptocurrencies are tumbling, leaving even fewer choices for funds seeking alternatives to US equities.
All these point to a good year for the Ghanaian economy and equities are already showing great signs. They are up 19.28% in January.
However, there could be trouble ahead. With strong wage growth and tax cuts, inflation could possibly be making a return to the US economy. If the US Federal Reserve reacts by hiking rates faster than anticipated, it could lead to a rapid appreciation of the dollar, capital flight from emerging markets to USA and a reduction in commodity prices, especially gold.
So while things are pointing to a favourable global environment, the country should know that things could change at any time.
Accountant | Economist-in-Training | Finance Blogger