Previous Quarterly Editions
Expropriation Risk: 43 43 44 45 Political Violence Risk: 63 61 60 62 Terrorism Risk: 36 36 36 38 Exchange Transfer and Trade Sanction Risk: 46 45 45 45 Sovereign Default Risk: 37 36 38 38
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News in January that the International Criminal Court had acquitted former president Laurent Gbagbo of crimes against humanity appears likely to reopen political wounds that never completely healed under his successor, Alassane Ouattara. Gbagbo was in office between 2000 and 2011, and almost 3,000 people were killed during the brief civil war in 2010-11 after he refused to leave following a disputed election. His wife, who was acquitted of similar changes in 2017, has indicated that Gbagbo has not ruled out a return to Ivorian politics, and his involvement would take the tensions already developing over the 2020 presidential election to new levels. President Ouattara is already struggling to prepare the governing RHDP coalition for the fact that he is not running for a third term. His attempts to transform the RHDP from a partnership between the RDR, his own party, and the PDCI led by former president Henri Koran Bedie into something much closer to a single, united party have foundered over the means by which the RHDP’s presidential candidate will be chosen. The PDCI believes that it should provide the candidate, while the RDR wants a primary system in which it is likely to prevail. The combined support of the RDR and PDCI was instrumental in securing Ouattara’s presidential victories in 2010 and 2015, but rumours that Ouattara might be contemplating a constitutionally questionable run for a third term have pushed the two parties further apart. Ouattara used a government reshuffle in July 2018 to reward senior PDCI officials who were moving away from Bedie with seats in a cabinet that has now swelled to more than 40 members. The speed and depth of the split within the RHDP threatens to end the tenuous stability in place since 2011. It has not helped that Ouattara chose to offer an amnesty to 800 political prisoners, many from the party previously led by Laurent Gbagbo; Gbagbo’s acquittal and possible return to politics puts the amnesty in a new light. At present, Prime Minister Amadou Gon Coulibaly, Defence Minister Hamed Bakayoko and Speaker of the National Assembly Guillaume Soro are the main contenders for the presidency. Soro, a former rebel leader from the north who helped propel Ouattara to power, is the most open about his ambitions but his candidacy could prompt resistance from southerners.
After rallying in the first half of 2018, cocoa prices fell back in the second on robust output from Ivorian and Ghanaian producers. Even so, a rebounding cocoa sector buoyed by strengthening global demand has enabled the country to recover its status as Francophone West Africa’s leading economy. However, growth in 2018 did not quite match the 7.8% achieved in 2017 as the government scaled back its expansionary stance, and the level of private sector activity remains somewhat disappointing. Although the IMF has welcomed the government’s success in tackling the deficit, with the 2020 election now on the horizon the government may find fiscal discipline harder to maintain as the temptation to boost public spending increases. While the outlook for the short-to-medium term remains buoyant, the possibility that Ouattara’s RHDP coalition may break up before the 2020 election, either through internal stresses or as part of a political realignment triggered by a Gbagbo return, will remain a concern for investors as it could impact growth. This in turn would reduce the government’s options for bolstering the economy, compounding the degree of political uncertainty.
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The strengthening cocoa sector, which saw prices rise by 15% during the 2017-18 season, has contributed to a rise in household spending, even though the ongoing price differential with Ghana continues to encourage smuggling across the border. However, export contract defaults during 2018 have imperilled the banking system, which is still struggling to collect repayments on cocoa loans after the price slump in 2017. Heavy government involvement in regulating cocoa prices meant that policy miscalculations compounded the effect of that downturn, and this could happen again if efforts to reform how the sector is regulated are put to one side now that prices have risen.
With the 2020 election still at the stage of political manoeuvring by potential candidates, serious political clashes are not expected in the coming months even though Guillaume Soto’s establishment of a new political party to further his ambitions is creating a new level of friction. However, if Laurent Gbagbo chooses to return to politics this may change quickly. Meanwhile, renewed public sector strikes over pay and conditions are adding to concerns about economic disruption.
The coordinated attacks by Islamist militants on the French embassy and army headquarters in the capital of neighbouring Burkina Faso in March 2018 underlined the regional threat posed by jihadists fleeing Syria, Iraq and Libya and attempting to link up with Islamist groups in West Africa. While the country has not seen a major incident since the attack on a beach resort at Grand Bassam in March 2016, the authorities remain on alert.
TREND ► OUTLOOK ▼
Inflation remains around 1%, although consumer prices began to rise towards the end of 2018 as higher costs for energy and transport offset lower food prices. Although some projections suggest inflation will reach 3.5% by the end of 2020, it is currently well inside the central bank’s target of 2%. The interest rate for the West African CFA franc zone, of which the country is a member, remains at 2.5%.
At around 30% of GDP, the country’s external debt is relatively low and widely regarded as sustainable. A reputation for sound economic and structural reform policies enabled the government to issue Eurobonds in 2017 and 2018 while offering some of the lowest yields in the region. Moreover, the 2018 issue was denominated entirely in euros in an effort to benefit from the currency’s relative strength against the dollar. The government could return to the bond market if needed, although the cost of doing so may rise as the 2020 election approaches.
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