Economic Studies
Ivory Coast

Ivory Coast

Population 23.7 million
GDP per capita 1,325 US$
B
Country risk assessment
C
Business Climate
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Synthesis

major macro economic indicators

  2014 2015  2016 (f) 2017 (f)
GDP growth (%) 8.8 9.0 7.5 7.9
Inflation (yearly average) (%) 0.4 1.2 0.7 1.5
Budget balance (% GDP) -2.3 -3.0 -4.0 4.5
Current account balance (% GDP) 1.5 -1.8 -1.8 -2.1
Public debt (% GDP) 46.5 48.9 49.0 48.3

 

(e) Estimate (f) Forecast

STRENGTHS

  • Diversification: hydrocarbons, ores and agricultural resources (world's leading cocoa producer)
  • Infrastructure undergoing modernisation
  • Improved business climate and governance
  • Strengthening political stability

WEAKNESSES

  • Economy dependent on weather conditions and movements in the price of cocoa, the country's main export product
  • Gaps still to be filled in the management of public finances, infrastructure and business climate, despite progress made
  • Slow progress on national reconciliation

Risk assessment

Growth still driven by major public works, improved business climate and political normalisation

Growth remained healthy in 2016 buoyed by ongoing major public works to repair infrastructure under the 2nd National Development Plan (2016-2020), the improved business climate and enhanced political stability. These factors, underpinning investment, broadly counterbalanced the negative impact on tourism of the Grand-Bassam beach resort attack in March 2016. Furthermore, guaranteed prices for farmers, the introduction of universal health cover and wage rises continued to drive private consumption in an environment of contained inflation. Activity is expected to remain vigorous in 2017, sustained by continued efforts brought to infrastructure developments, greater investment in agriculture and housing alongside still robust private consumption. As to the country's flagship product, cocoa, the harvest begun in October 2016 looks promising, after a poor mid-crop in the spring, due to the impact of El Niňo. However, cocoa prices have plummeted since summer 2016, below 2000 US dollars/tonne (in New York) in February 2017 for the first time since 2011, due to the stagnation in world demand and ample inventories. It is worth noting that, as a result of the fall in world prices, defaults on export contracts covering 350 000 tonnes of cocoa have been recorded. Production for the 2016/2017 season is expected to grow less rapidly than initially planned.In this context, the Coffee and Cocoa Council of Ivory Coast is seeking to boost prices by suspending forward sales ahead of the 2017-2018 crop. Meanwhile, although steadily declining, hydrocarbon production could recover in the years to come thanks to the discovery of new fields and planned investments.
Growth remains exposed to commodity price fluctuations and is still constrained by outdated infrastructure. However, the economic recovery since the end of the post-electoral crisis has helped raise the population's living standards and stimulate internal consumption. To maintain strong growth, it looks as if it will be necessary to develop the manufacturing export sector (by increasing investment in human capital and reducing the obstacles to cross-border trade), to reduce income inequalities and avoid implementing a pro-cyclical budget policy.

 

Fiscal and current account deficits which are tending to widen

The current account deficit is tending to widen reflecting strong imports associated with investments. Cocoa exports have dipped slightly since reaching a peak in 2015, while oil exports have for several years been on an uninterrupted downward trend. Both products still account for half of sales abroad. The decline in cocoa prices, which started in the summer of 2016 and further continued in the first quarter of 2017, should weigh on export revenues.Unlike the trade balance, the invisibles balance is in deficit. Foreign direct investments and external borrowing help to finance most of the current account deficit.
The fiscal deficit deepened in 2016, because of increased spending including expenditure on security, health and education. In order to maintain the sustainability of the public debt, attained since the debt relief granted to the country in 2012 under the HIPC/MDR initiatives, the authorities and the IMF have agreed that the public deficit should converge towards the WAEMU norm of 3% of GDP by 2019. This will require enhanced revenue collection and containment of current spending. Steps to address budget risks from struggling public-sector companies are planned. In addition, an agreement has been reached on the stages for accelerating the restructuring of banks and state-owned enterprises. Nevertheless, with the decline in cocoa prices, it is unlikely that the revenues target for 2017 will be achieved. The bonuses given to the mutineers in January 2017, coupled with concessions from the government granted to civil servants’ unions in order to appease social unrest and to end three weeks of strikes (also in January), should weigh on the budget deficit as well. As a result, the budget balance is expected to deteriorate in 2017. Plus, the issue of the stock of public servants’ wages arrears remains unresolved and could degrade further the 2017 budget.

 

Strengthened political stability but weakened by a tense social climate

The October 2015 presidential election led smoothly to the re-election of the outgoing President Alassane Ouattara for a five-year term, which allowed the country to finally turn the page on the violence which had bloodied the country after the 2010 presidential election. Nevertheless, some on the opposition called for a boycott, citing loyalty to former President Gbagbo (currently being tried by the International Criminal Court). The Head of State secured adoption of a new constitution by referendum at the end of October 2016, which provides for the creation of a post of Vice-president and of a Senate and eliminates the concept of Ivorian nationality by clarifying the conditions for eligibility for the office of president.
The uncontested victory of the Rally of Houphouetists for Democracy and Peace (RHDP - 167 seats out of 255), a coalition of five political parties, to the legislative elections of December 2016 should enable President Ouattara to pursue the reforms that supported the Ivorian growth over the past five years.
Nevertheless, the reconciliation between the Ivorians has not been achieved yet. The 2016 referendum and legislative elections weres boycotted by the opposition and the voters turnout were low. In addition, the coalition might struggle to unite behind a single candidate after Alassane Ouattara ends his second and last term in 2020. Moreover, young people and the poor strata of the urban population are gaining little benefit from economic growth. The lack of jobs, the inadequate quality of public services and perceived corruption could still fuel social tensions. Strikes in the civil service in January 2017, which were reinstated by a part of the trade unions two months later, illustrate the tense social climate. The mutinies that erupted in January 2017 within the Ivorian army in order to claim bonuses alter the image of the Ivorian recovery and reminds that the healing of the social fabric is not yet acquired.

 

Last update: April 2017

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