Previous Quarterly Editions
Expropriation Risk: 43 43 43 44 Political Violence Risk: 62 63 61 60 Terrorism Risk: 36 36 36 36 Exchange Transfer and Trade Sanction Risk: 48 46 45 45 Sovereign Default Risk: 38 37 36 38
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President Alassane Ouattara has sought to downplay growing political tensions within the governing RHDP coalition in recent months. However, his attempts to reshape the RHDP from a partnership between his own party, the RDR, and the PDCI led by Henri Koran Bedie into a united party ahead of the 2020 presidential election have foundered over how it will choose its candidate. 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 new rumours that Ouattara might be contemplating a run for a constitutionally questionable third term have pushed the two parties further apart. Ouattara used a government reshuffle in July ostensibly to paper over the increasingly evident rift between the two parties, but in fact used the gift of seats in a cabinet now swelled to 41 members to reward senior PDCI officials who were moving away from Bedie. In August, Bedie called for the upcoming local elections to be postponed in order to allow time for electoral reforms. Ouattara responded with an amnesty for 800 political prisoners, many from the FPI previously led by former President Laurent Gbagbo, who is currently on trial before the International Criminal Court.
Although well-respected as an economist and technocrat, Ouattara has recently faced international criticism for his increasingly authoritarian behaviour and may hope the amnesties will help to defuse this. The speed and depth of the split within the RHDP threatens to end the country’s tenuous stability since the brief civil war in 2011 in which more than 3,000 people were killed. As the world’s biggest producer of cocoa, the country has recovered its status as Francophone West Africa’s leading economy but periodic flare-ups over land, some with an ethnicity component, as well as several army mutinies over unpaid bonuses to former rebel soldiers, have tarnished its recent economic successes. Its regional importance means that any political and economic turbulence at home is likely to be felt beyond its borders.
Growth in 2018 may not quite match the 7.8% recorded last year as the government scales back its expansionary stance. Private sector activity remains somewhat disappointing, however, and this may be a medium-term problem as the government scales back the public spending that has underpinned growth. In July, the IMF’s annual report on the economy was largely positive and welcomed the government’s success in reducing the fiscal deficit to 4.2% of GDP in 2017. It is aiming for a further cut to 3% this year but may need better than expected growth to manage this. 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 is a concern for investors as it could impact growth. Lower growth would reduce the government’s options for bolstering the economy, compounding the degree of political uncertainty.
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The recovery in cocoa prices has helped to support a rise in household spending that, in turn, has increased government revenues and so reduced its immediate need to look for new sources of income. However, the planned elimination of several corporate tax exemptions and rebates, as well as some new luxury taxes, still looks likely to go ahead this year. The 45% fall in cocoa prices during 2017 resulted in significant defaults on contracts, but higher prices mean this should be less of a problem in 2018-19.
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While clearly growing, the tension between the two main parties in the governing coalition does not look likely to trigger conflict between their rival supporters at this stage. However, this may change when the 2020 presidential election becomes closer, especially if speculation about Ouattara standing for a third term is not dispelled. The formation of a new party last year around the speaker of the National Assembly, Guillaume Soto, a former leader of northern rebel groups during 2002-04, who has been linked to recent military protests, could prove significant. Soto is also seeking the presidency in 2020 and his party, the UDS, has already attracted a young following and adds a new and possibly violent fault line in Ivorian politics.
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The coordinated attack in March by Islamist militants against the French embassy and army headquarters in the capital of its northern neighbour, Burkina Faso, together with the subsequent dismantling of a cell planning another attack there, underlined what is now the long-term reality of regional terrorism as jihadists fleeing Syria, Iraq and Libya attempt to link up with Islamist groups in West Africa. While there have been no incidents similar to the attack that took place on the beach resort at Grand Bassam in March 2016, the authorities remain on alert.
While still below 1%, the monthly pace of inflation has been quickening recently as lower food prices are offset by higher costs for utilities and transport. Even so, it remains 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 part, remains at 2.5%.
Cote d’Ivoire’s external debt is forecast to reach 30% of GDP this year, but that is relatively low for its peers and is widely seen as sustainable. A reputation for sound economic and structural reform policies under President Ouattara helped the country issue a successful Eurobond last year and follow that an issue of 1.7 billion euros in March with one of the lowest yields recently offered by an African placement. In a departure from previous issues, this was entirely in euros in an effort to benefit from the currency’s relative strength against the dollar, and it included the country’s first 30-year debt. 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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