Previous Quarterly Editions
Expropriation Risk: 56 56 56 56 ► Political Violence Risk: 57 57 57 57 ► Terrorism Risk: 42 44 44 46 ▲ Exchange Transfer and Trade Sanction Risk: 55 55 55 55 ► Sovereign Default Risk: 66 66 66 66 ►
TREND ►
Cote d’Ivoire’s economy is expected to bounce back this year from the setback triggered by the COVID-19 pandemic in 2020 with a growth rate of 6.5% of gross domestic product (GDP), up from 2% recorded last year, according to the International Monetary Fund (IMF)’s latest economic assessment. If realised, such a growth rate would put the country exactly where it was before COVID-19, making Côte d’Ivoire one of the few economies in sub-Saharan Africa effectively to brush off COVID-19’s impacts in little over a year.
The budget deficit is also on target to fall to 3% of GDP, down from a peak of 5.9% in 2020, following the decision by President Alassane Ouattara’s Rally of Houphouëtists for Democracy and Peace (RHDP) government to ramp up government spending in an effort to mitigate the pandemic’s worst effects. The 6.5% growth forecast appeared to be in jeopardy early in the second quarter following a prolonged dry season, which greatly reduced water levels at the country’s hydropower plants, constraining power generation and leaving households and businesses without electricity for protracted periods. Electricity was rationed throughout the country from April as the national grid, which normally generates some 2,230 megawatts (MW) of power, was confronted by a 10% shortfall in power generating capacity. Power generation had largely returned to normal by the third quarter, although the government has since unveiled plans to build a new 200MW liquefied natural gas plant in an effort to prevent a repetition of such power shortfalls in the future.
As the ruling RHDP party controls 137 of the 254 seats in the National Assembly and the largest opposition grouping can muster only 50 seats there is little to prevent the ruling party from pressing ahead with its agenda of attracting foreign investment and cutting red tape. This is expected to buoy foreign investor sentiment. Such sentiment received a further fillip in August with the decision by UK Export Finance, the UK government’s export credit agency, to lend GBP206mn (USD282.6mn) towards a GBP279mn project to build six new regional hospitals in the country, which collectively will have a catchment area of more than 1 million people.
Construction work has already begun on the project, which is expected to be completed by 2024, and which honours Ouattara’s pledge to the electorate to improve the quality of life of the country’s 26 million people -- including those living in rural areas.
President Ouattara’s ruling RHDP has a long track record of upholding private property rights and there is little or no indication of any appetite to alienate foreign investors by deviating from established precedent.
The governments of Côte d’Ivoire and Ghana signed a Cocoa Agreement in August which seeks to tackle some of the most pervasive issues in the cocoa industry including child labour, child slavery and low incomes, which have made them vulnerable to external criticism. The two countries, which account for 60% of global cocoa output but receive only 3% of global revenues -- estimated to be between USD80-100bn per annum -- have been trying to increase their share of industry revenues since the inauguration of the 2018 Abidjan Declaration calling on the two countries to coordinate production, marketing and sales, and research.
The two governments are hoping to boost local processing and build additional storage capacity, to avoid flooding the market with excess production, thereby boosting prices. Campaigners insist that most cocoa farmers live on less than USD2 per day, which makes them poorer than they were in the 1970s and 1980s. Attempts by both governments to improve the lot of growers by imposing a unilateral USD400-a-ton levy, dubbed a living income differential, have met with considerable resistance by global buyers who are refusing to pay the levy and have sought to increase their purchases from Latin American or Asian growers. Global buyers insist that they are struggling to reduce costs in a market faced with falling demand, but face the prospect of being ‘named and shamed’ if they do not comply.
President Ouattara and former President Laurent Gbagbo, who was acquitted of war crimes and crimes against humanity in 2019, met for the first time in Abidjan in August since the civil war erupted in 2010-11 in which some 3,000 people were killed. The two political leaders were pictured holding hands, smiling and embracing, in what was widely seen as a choreographed performance designed to signal to all Ivorians that a decade of political turbulence was now behind them, and that national reconciliation was now the order of the day.
Gbagbo requested that scores of people arrested during pre-election violence in the run-up to the October 2020 presidential ballot were released, which Ouattara largely honoured. Gbagbo has since called for the creation of a new political party to replace his faction-ridden Ivorian Popular Front (FPI), suggesting that he intends to remain a political player.
TREND ▲
Côte d’Ivoire, like neighbouring Ghana, is preoccupied with recent developments in Nigeria -- in which Islamic State of West Africa Province insurgents routed the home-grown Boko Haram movement in May -- and what this development might mean for insurgent movements and dissident groups operating across West Africa. Both are anxious that the Islamic State-led insurgency could prove to be more effective than Boko Haram and might be tempted to support or mount terrorist attacks in other parts of West Africa.
The IMF forecast of 6.5% economic growth for 2021 has helped to boost investor sentiment in Côte d’Ivoire’s medium-term growth outlook, despite the temporary setback to the economic recovery arising out of poor seasonal rains and its impact on hydropower generation. Early indications are that the RHDP government is planning to raise an additional USD1.2bn dollars in new debt to help fund the government’s infrastructure and social development programmes, which can be expected to win investor approval.
Cote d’Ivoire is one of the few countries in sub-Saharan Africa that have been able to borrow on the international capital markets during the COVID-19 pandemic, largely because of the country’s track record for economic reform and fiscal prudence -- enabling it to borrow without penalty, in contrast to most other African countries. The country’s strong growth outlook, relatively stable inflation and increased political stability are likely further to reinforce this trend, which should help it withstand any further shocks to macroeconomic stability.
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