My Somber Prediction

1 yr chart 4-10-14

Reviewing the economic situation is pretty depressing.  The cedi keeps falling; everyone complains about fuel and transport costs; fixing the structure of Ghana’s economy won’t be solved overnight.

Closer to home, I just found out my favorite deli closed down today because business is bad.

My Prediction

Extrapolating can be dangerous.  You’re assuming the future looks a lot like the past.

Year to date, the cedi has gone from 2.35 cedis per 1 USD to 2.72 cedis per 1 USD.  This is approximately a 15 percent decline in 14 weeks or about 1 percent per week.

Monitoring the cedi/dollar exchange rate for the last few months, I decided to make a prediction.  Lately, every week the cedi seems to lose 1-2 percent of its value.

  • If it continues to lose 1 percent of its value per week, then the exchange rate will be 3.97 (2.72 * (1.01)^(38)) at the end of the year
  • If it continues to lose 1.5 percent of its value per week, then the exchange rate will be 4.79 (2.72 * (1.015)^(38)) at the end of the year
  • If it continues to lose 2 percent of its value per week, then the exchange rate will be 5.77 (2.72 * (1.02)^(38))

At the end of the year, if nothing is done, it looks like the cedi will trade between 4 to 6 cedis per dollar. I’m not sure what can be done to halt the depreciation of the currency.  All I do know is that the average Ghanaian will suffer.

 

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