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The Ghana Cedi is expected to depreciate in the coming months and end the third quarter at $2.10. The local currency, which is also projected to fall to $2.15 by the end of this year, has weakened faster than expected in recent months on the back of deteriorating terms-of-trade, which has aggravated the country�s precarious current account deficit even further. A report by ABSA Capital titled �African Viewpoints� which made this known, pointed out that the declining gold and cocoa export prices, especially have more than offset the moderation in fuel-related energy costs. �Our correlation analysis confirms that the Ghana Cedi indeed moving closely in line with the price of bullion. �The recent depreciation of the cedi has taken place in the face of tighter monetary policy and considering that we are not expecting another rate hike from the BoG over the coming quarter, we believe that the Ghana Cedi is that much more vulnerable over the coming months.� The report said although the cedi has already weakened sharply in recent months, momentum remains strongly bearish, adding that �from a seasonality perspective, the local currency also tends to perform poorly during the third quarter.� ABSA Capital�s report also indicated that the country�s fiscal outlook was challenging with the recent misses in monthly targets suggesting that there are significant risks to the full-year deficit target of 9 percent of GDP. Although recent data also imply a slowdown in economic growth in 2013, we expect monetary policy to remain tight amid rising inflation. �Real activity appears to have slowed in the first half. In particular, the Bank of Ghana (BoG) noted in May that its Composite Index of Economic Activity recorded growth of -0.6 percent year-on-year in March against 14.8 percent year-on-year a year before with most components of the index recording negative growth. �Credit growth, albeit still at a high level, showed a continued slowing trend at 28.7 percent year-on-year in March compared to 34.1 percent at end of 2012 and 44.6 percent a year ago. Meanwhile, the Central Bank�s business and consumer confidence indices have declined in recent months owing partly to reduced optimism on growth and heightened inflation expectations.� Moreover, it noted that monetary policy settings could also remain tight in the face of a weaker currency likely keeping bonds on the back foot. It however said �a sharp rebound in gold prices and/or further rate hikes could ensure that the cedi recovers over the coming months.� By Samuel Boadi