Cameroon Business Forecast Report Q2 2009

Publication Date	February 2009
Publisher	Business Monitor
Product Type	Report
Pages	58
ISBN Number	not applicable
Product Code	BMI03421

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Summary

Falling Oil Breeds Challenges Significantly diminished oil prices in 2009, coupled with a global recession, will present myriad challenges for Cameroon over the year. Lower oil prices are forecast to contribute to slowing investment and a contraction of exports, both of which will weigh on real GDP growth. Falling exports will also help turn Cameroon's current account surplus into a deficit in 2009, though shrinking imports are expected to take some of the bite out of the deficit. Finally, the drop in oil revenues will also force expenditure cuts in 2009, though we are still forecasting the country to run a fiscal deficit this year. The worsening economic outlook could exacerbate political discontent with the ruling party over the medium term, though so far the government has managed to continue holding the reins of power tightly.

On the political front, tensions are on the rise along the country's borders. In response to piracy in the Gulf of Guinea, France and the US are considering military aid for the country, though concerns over the extent of corruption in Cameroon's armed forced may limit any support. Meanwhile, tensions with Equatorial Guinea are rising, following a hostage trade between the two countries. On the domestic front, an independent election committee has been staffed with former ruling party members, leading us to believe real electoral reform is unlikely.

We have revised down our real GDP growth forecast to 2.4% in 2009 on the back of falling export volumes and slowing investment growth, though stable private consumption should keep the economy's expansion positive. The growth story does not look promising across most of the Central African Economic and Monetary Union, and we are calling for 100bps of interest rate cuts over 2009, though we believe the stability of the CFA franc/euro peg will be maintained. Meanwhile, we warn that the risk of the emergence of militancy in Cameroon similar to that seen in the Niger Delta could negatively impact oil sector revenues, which would strain the budget, current account and real GDP growth.

Cameroon's business environment is likely to remain challenging for foreign investors over the coming years. The government has pledged to tackle the country's rampant corruption, but graft and nepotism continue undermine the independence of state institutions and the judicial system.

Furthermore, a weak transport system, worsening energy shortages and a relatively inflexible labour market are likely to impose considerable constraints on private sector investment going forward. The potential for escalating piracy and militancy also represents a risk to stability over the medium term. While the level of violence has not yet reached levels seen in neighbouring Nigeria, we believe the potential for escalation remains.

Content

Executive Summary
- Falling Oil Breeds Challenges
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Elections Cameroon: More Of The Same?
- The appointment of members to an electoral commission confirms the continued reluctance of the ruling CPDM
- to open up political space, in a context where the party retains a strong grip on the political apparatus
- TABLE: POLITICA L OVERVIEW
- Foreign Policy
- Border Tension On The Rise
- The kidnapping of French oil workers by militants, followed by their successful release, could have the useful
- side effect of bringing Cameroon military aid from France, although concerns about alleged high levels of
- corruption in the countrys military may limit the former colonial powers largesse
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Growth Tapping The Brakes In 2009
- We see real GDP growth in Cameroon hitting 2.4% in 2009, down from 4.6% in 2008, primarily led by a sharp
- slowdown in investment and a contraction of export volumes
- TABLE: ECONOMIC AC TIVITY
- Monetary Policy
- CFA Franc Zone In 2009: The Year Of Rate Cuts
- The year 2009 will be a challenging one for the central African franc (CFA) zone countries, but we expect the
- XAF/EUR peg to hold
- TABLE: MONETARY POLICY
- Balance of Payments
- Hitting Negative Territory In 2009
- On the back of falling oil, commodity, and tourism exports, we see Cameroons current account surplus, equal to
- 1.2% of GDP in 2008, flipping to a deficit equal to 3.5% of GDP in 2009
- TABLE: BALANCE OF PAYMENTS
- Fiscal Policy
- Budget To Move Into Deficit
- We are forecasting Cameroons budget to flip from a surplus equal to 2.5% of GDP in 2008 to a deficit equal to
- 0.2% of GDP in 2009
- TABLE: FISCA L POLICY
Chapter 3: 10-Year Forecast
- The Cameroonian Economy To 2018
- Growth Trajectory to Improve Over Next Decade
- TABLE: LONG -TERM MACROECONOM IC FORECA STS
Chapter 4: Special Report
- China
- A Seismic Upheaval In 2009?
- One of the biggest and least discussed wild cards that could rear its head in 2009 is dramatic political
- upheaval in China
- United States
- Europe
- The deteriorating global macroeconomic outlook, high levels of leverage, and a broken business model will
- combine to spell trouble for the financial services sector in 2009
- TABLE: Banks Leverage Ratios
- TABLE: Assets As % of Home Country GDP
- TABLE: Assets As % of Home Country GDP When Eurozone Is Considered Home Country
- TABLE: Exposure As % of Total Exposure To Region
- TABLE: Banks Foreign Exposure (US$ mn)
- TABLE: Exposure As % of National GDP
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Institutions
- TABLE: BMI LEGAL FRAMEWORK RATINGS
- Infrastructure
- Market Orientation
- TABLE: MIDDLE EAST & AFRICA ANNUAL FDI INFLOWS
- TABLE: TOP EXPORT DESTINATIONS
- TABLE: BMI TRADE RATINGS
- Operational Risk
Chapter 6: BMI Global Assumptions
- Global
- Global Contraction On The Cards In 2009
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: GLOBAL AND REGIONAL REAL GDP GRO WTH, % CHG Y-O-Y
- Economic Activity
- TABLE: DEVELOPED STATES, REAL GDP GRO WTH FORECA STS
- TABLE: EMERGING MARKETS, REAL GDP GRO WTH FORECA STS
- TABLE: DEVELOPED MARKET EXC HANGE RATES
- Monetary Policy
- Commodities
- TABLE: EMERGING MARKET EXC HANGE RATES