Cameroon Business Forecast Report Q4 2009

Publication Date	July 2009
Publisher	Business Monitor
Product Type	Report
Pages	48
ISBN Number	not applicable
Product Code	BMI04090

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Summary

Economy Looking Up... A Bit

On the back of government action - specifically, large investments for the national airline and cutting staple goods prices - we have elected to slightly tick-up our real GDP growth forecasts for 2009 and 2010. At the same time, an upward revision to BMI's oil forecast has led us to revise our outlook for Cameroon's current account and fiscal situation, both of which have improved.

However, the positive trend is at least partially offset by growing risks on the political front. A major offensive by the Nigerian government against the militants of the Niger Delta risks pushing the militants into Cameroon's Bakassi peninsula; and the death of President Omar Bongo Ondimba of Gabon means the long-standing stability of Cameroon's southern neighbour can no longer be taken for granted. That said, these are still only risks - our core scenario retains acceptable levels of political stability.

This is not to say it will be smooth sailing from here on. Cameroonian President Paul Biya recently removed the prime minister (Ephraim Inoni) and reshuffled his cabinet, although this was expected and, if anything, Biya's hold on power looks more assured than ever before, all but guaranteeing him a third term in office at the elections in 2011. Still, in addition to the risks posed by regional instability, violent expressions of discontent cannot be ruled out in the months and years ahead, though we believe the government will be able to manage them.

According to our forecasts, Biya's re-election campaign will be helped by improvements in the economic situation. While 2009 is certain to be a bad year, by 2011 growth is forecast to be back near 6.0%, the current account will flip from deficit into surplus and a rise in fiscal revenues will let the government finally increase expenditure. Getting to 2011 may prove tough however, and we believe the regional central bank will need to continue its policy of monetary easing through the end of this year. At the same time, if some of the external political risks become manifest - most notably the development of a militant movement in the Bakassi peninsula that disrupts oil production - it could have significant negative consequences for growth, the current account and the fiscal situation.

Meanwhile, 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 to 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 is also a risk to stability over the medium term.

Content

Executive Summary
Economy Looking Up. A Bit
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Reshuffling Old Cards
- A recent cabinet reshuffle should shore up President Biya's long-entrenched regime, enabling him to navigate
- current difficulties to secure a third elected term in office in 2011, a year when the economy should return to
- strong growth
- Table: Political Overview
- Foreign Policy
- External Relations: MEND Still Tops Agenda
- Potential risks to political stability are posed by Nigeria's heightened campaign against Niger Delta militants and
- the death of Gabon's president
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Ticking Up Our Growth Forecasts
- We now see real GDP growth in Cameroon at 0.7% in 2009 and 2.4% in 2010, with government boosts to investment
- and the mandated cutting of food prices leading to the upward revision in our forecasts
- Table: ECONOMIC ACTIVITY
- TABLE: GDP CONTRIBUTION TO GRO WTH
- Monetary Policy
- Rates View On Target
- We are holding our view for another 50bps of interest rate cuts by the Bank of Central African States, based on
- slowing growth, inflation, and our forecasts for further monetary easing by other central banks
- Table: MONETARY POLICY
- Fiscal Policy
- Budget Deficit Sustainable
- With expenditure expected to remain constant despite falling revenues, we forecast that the Cameroonian
- government will run a fiscal deficit this year and the next, to be funded by debt issuance, government savings
- and IMF support
- Table: FISCAL POLICY
- Balance Of Payments
- Current Account Deficit Hitting Trough In 2009
- While Cameroon's current account deficit will widen in 2009, we believe things are set to improve in the
- following years, with the deficit actually flipping to a surplus by 2011 as new oil production comes online
- Table: CURRENT ACCOUNT
Chapter 3: 10-Year Forecast
- The Cameroonian Economy To 2018
- Growth Trajectory To Improve Over Next Decade
- Average growth in Cameroon over the next ten years is forecast to outpace that seen over the previous decade,
- on the back of infrastructure investment (partially funded by elevated oil prices) and rising growth in the non-oil
- extractive sector
- Table: Long-Term Macroeconomic Forecasts
Chapter 4: Special Report
- The Fate Of ???Chindia'
- Overview
- Although China and India will continue to grow during the global recession of 2009-2010, they are not immune
- to the downturn, and face a number of risks in the near term
- China And India SWOT
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: BMI TRADE RATINGS
- TABLE: TOP EXPORT DESTINATIONS
- Operational Risk
Chapter 6: BMI Global Assumptions
- Global Assumptions
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: GLOBAL & REGIONAL REAL GDP GRO WTH
- TABLE: DEVELOPED MARKET EXCHANGE RATES
- TABLE: EMERGING MARKET EXCHANGE RATES