Côte d'Ivoire

Let it grow

Country Rating C3

Strengths

  • Some political consolidation and signs that democratic evolution is deepening.
  • Close links with France, which maintains a rapid-deployment force for regional interventions.
  • World’s leading producer of cocoa (approximately 35-40% of global supply).
  • Membership of the West African Monetary Union (WAMU) and the CFA franc zone provide relative monetary stability, a common currency and access to a regional central bank. Low exchange rate and transfer risk.
  • Considerable debt relief under the HIPC initiative and, latterly, through the Paris Club.

Weaknesses

  • Despite recent advances, the domestic political environment retains some fragilities. Overall security still dependent on UN peacekeepers.
  • Ethnic and regional tensions.
  • Uncertain regional influences including borders with Mali, Liberia and Guinea.
  • Vulnerability to climatic effects on agricultural output and to changes in internationally-determined commodity prices.
  • Fiscal and current account deficits.
  • Structural business environment is strengthening, but from a weak base.
 

Economic Overview

The advantage of untapped potential

After several lost decades (either for political or commodity prices reasons), Côte d’Ivoire finally enjoys robust growth levels, with about +9% (on average, per year) during the last 5 years.  The sudden political change provided an opportunity to pursue a reforms agenda. This, in turn, boosted the ease of doing business as reflected in the World Bank ranking which improved from 167 in 2012 to 142 in 2017 and governance indicators.

The diversification of the economy increased and the investment ratio climbed to acceptable levels (18% of GDP on average during the last 5 years, about +50% from the former 3-decades equilibria), with a sizable effect on growth. The ICOR indicator of investment efficiency stands at 2: Côte d’Ivoire needed only 2% of GDP of investment to deliver 1% of growth, an even better efficiency than China in boom years (ICOR of 3). New sectors are developing amidst a virtuous circle of improved governance and attractiveness for foreign investors.

 

Still vulnerable to commodity prices slump but financing risk is not a big issue

Food commodities still make the bulk of exports. As a consequence, foreign currency financing is still a by-product of commodity prices. The current juncture is not favourable for two Côte d’Ivoire’s main exports since global oversupply sent cocoa and coffee prices lower by -33% and -15%, respectively. Given the vulnerability of local producers to price slumps, mechanisms to compensate for lower prices exist but will have a fiscal cost (fiscal deficit will rise to -4.5% of GDP in 2017 and public debt will increase to 51.5% of GDP). This fiscal cost will be limited in size because of some lowering of guaranteed farm gate prices by the regulator.

Yet the likelihood that foreign currency earnings will decrease for a significant period of time will put external liquidity under scrutiny. Per se, current levels of import cover are not alarming (4.8 months), but the country secured a USD660 million IMF facility in December 2016. But short-run disbursements will be quite low. Cote d’Ivoire has already requested more assistance. However, the fulfilment of IMF conditions helped the country to secure market financing, with hard currency bond issuance of USD 2 billion in June 2017 (over-subscribed by a factor of five).

 

Managing the growth dividend will be key

Political risk remains elevated. The divided landscape was evident even before President Ouattara took office. Policymakers face growing demands for salary raises, including by mutinous soldiers. In this context, lower commodity prices and the effort to keep fiscal balances in check will be difficult to manage.

The overall policy stance is generally sound and the IMF in its most recent review of the country’s reform programme (end-May 2016)² indicated that economic performance has “been impressive” and the outlook is “favorable”.  The Fund is likely to provide further financial assistance, if requested; an Extended Credit Facility (ECF) expired in December 2015. Moreover, regional (including the AfDB and UEMOA, see below) and other multilateral agencies remain supportive. Indeed, in May 2016, more than USD15bn was pledged at a donor meeting, almost double the amount Côte d’Ivoire was seeking to help fund a five-year development programme.

 

    COTE%20IVOIRE

    Côte d'Ivoire

    C3

    GDP

    USD31.76bn
    (World ranking 95, World Bank 2015)

    Population

    22.7 million
    (World ranking 55, World Bank 2015)

    Form of state

    Multiparty Presidential Republic

    Head of government

    Alassane Dramane OUATTARA

    Next elections

    October 2020, presidential

    Last reviewed: 22/06/17

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