Estudios Económicos
Cote d'Ivoire

Cote d'Ivoire

Population 25.6 million
GDP 1,681 US$
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Country risk assessment
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Synthesis

major macro economic indicators

 

 

  2016 2017 2018(e) 2019(f)
GDP growth (%) 8.2 7.8 7.4 7.0
Inflation (yearly average, %) 0.7 0.8 0.6 1.4
Budget balance (% GDP) -4.0 -4.2 -3.8 -3.2
Current account balance (% GDP) -1.8 -2.1 -2.7 -3.1
Public debt (% GDP) 47.8 46.8 48.3 47.3

(f): forecast

STRENGTHS

  • Diverse resources: hydrocarbons, ore (gold, copper, iron, manganese, bauxite) and agricultural wealth (world’s largest producer of cocoa, coffee, sugar and cashew nuts)
  • Infrastructure undergoing modernisation
  • Improving business climate and governance
  • Strengthening political stability

WEAKNESSES

  • Economy vulnerable to weather-related hazards and changes in the price of cocoa (main export product)
  • Gaps remain in public finance management, infrastructure and the business environment
  • Slow progress in national reconciliation

Risk assessment

Growth prospects exposed to political risk

Growth is expected to remain strong in 2020, supported mainly by investment. The rise in private investment should continue to fuel construction, agro-industry and services (trade, transport and ICT in particular). Private investment will benefit from the impetus provided by public investment under the 2016-2020 National Development Plan, with initiatives including, for example, the Abidjan urban transport project and infrastructure related to the organisation of the 2023 Africa Cup of Nations football tournament. However, political uncertainty associated with the high-stakes presidential election in October 2020 may encourage some investors to exercise caution, curbing the contribution from this growth driver. While consumption may be supported, on the one hand, by an increase in social spending, its contribution might be constrained, on the other hand, by the electoral process, if households and businesses grow nervous. Brisk domestic demand is expected to support an increase in imports that will depress the contribution from foreign trade, despite a likely increase in agricultural (cocoa, cotton), mining (gold) and oil (refined products) exports. The cocoa sector, which is still struggling with cocoa swollen-shoot virus, should see a slight increase in production in 2020 but could face further difficulties if international prices fall.

 

Election-related spending poses the main budgetary risk

In 2020, the budget deficit is expected to remain close to the WAEMU convergence criterion (3% of GDP). Strong economic activity and collection efforts are expected to support an increase in tax revenues, which represent less than 17% of GDP. Investment expenditure, mainly in infrastructure projects, should continue to absorb the bulk of budgetary resources. Spending will include implementation of the government's 2019/2020 social programme with, in particular, the gradual rollout of universal health coverage. Current expenditure is set to increase with the costs of organising the election, while efforts to control the public wage bill should be kept up. The cost of debt service is also expected to increase. The deficit is expected to be financed by domestic and external borrowing. Fiscal policy should get support from IMF programmes, which are expected to be extended into 2020. Debt, which is at its highest level since the country benefited from restructuring under the HIPC initiative, is expected to stabilise. The risk of debt distress remains exposed to external shocks, such as a fall in cocoa prices, or domestic shocks, including the threat of fiscal slippage during the election period.

The current account deficit is expected to stabilise after being hit in 2017 by the combined impact of a deterioration in the terms of trade (with the fall in cocoa prices) and higher imports. The trade surplus should be virtually unchanged, with increased imports of capital goods offsetting higher exports. Deficits in the balance of services (freight and services related to project implementation), income (profit repatriation by foreign companies and debt interest payments) and transfers (remittances by foreign workers) will push the current account into the red. Financial flows, mainly FDI, project loans and portfolio investments, will finance the current account deficit and may contribute to the accumulation of WAEMU's common foreign exchange reserves.

 

The shadow of the 2010-2011 crisis hangs over the 2020 election

Alassane Ouattara has been President since 2011, following the post-election violence of 2010-2011, when approximately 3,000 people died. His smooth re-election in 2015 showed that the political climate had normalised somewhat. However, the presidential election scheduled for October 31, 2020 could prove more tumultuous. The President’s ambiguous stance over whether he intends to run for a third term is a source of tension. In principle a third term is prohibited under the 2016 constitution. However the constitution does not indicate whether the two-term limit applies retroactively. In addition, there was controversy over the appointment of a new electoral commission in the summer of 2019. Tensions are also being heightened by the prospect of renewed hostility between the three political forces that have been vying for power for three decades. The 2018 split in the alliance between President Ouattara's Houphouetist Rally for Democracy and Peace and the Democratic Party of Côte d'Ivoire led by former President Henri Konan Bédié (1993-1999), and the acquittal of former President Laurent Gbagbo (2000-2010) in early 2019 of charges of crimes against humanity, have brought all those involved in the 2010-2011 crisis back into the political spotlight. Although it is doubtful that Laurent Gbagbo will run for President after the International Criminal Court prosecutor appealed his acquittal in September 2019, he will probably exercise influence in the election through the Ivorian Popular Front. The issue of an international warrant in December 2019 for Guillaume Soro, a prominent figure in Ivorian political life for more than 20 years and a declared candidate, could fuel nervousness. In this context, the constitutional reform envisaged by President Ouattara in the first quarter of 2020 could prove divisive. By rekindling tension, this election threatens to test the fragile progress towards national reconciliation made in the past decade.

 

Last update: february 2020

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