Cote d'Ivoire Business Forecast Report Q2
2013

Cote d'Ivoire Business Forecast Report Q2 2013

Core Views

After reaching 8.4% in 2012, economic growth in Cote d'Ivoire will average 7.6% between 2013 and 2017. Real GDP growth in 2013 will fall to 7.5% on account of base effects, and then subsequently trend upwards as the economy recovers from its 2010-2011 crisis.

Rising government revenue and debt forgiveness will fuel a surge in investment spending, which will help to improve Cote d'Ivoire's large infrastructure deficit.

While we do not believe that the government of President Alassane Ouattara faces an serious threat to its ability to govern, political tension will remain high over the duration of our forecast period.

Major Forecast Changes Evidence that economic reforms are having an effect and the announcement of a major aid grant from France have caused us to upwardly revise our economic growth forecasts for 2013 to 7.5%.

New data from our Commodities Team have led us to increase our current account forecasts for 2013 to 3.3% of GDP.

Key Risks To Outlook Upside Risks: Offshore oil reserves could significantly boost Cote d'Ivoire's oil production.

Downside Risks: Political tensions remain high, and BMI does not believe that any substantial progress towards integrating opposition supporters into the political process is likely in the short term.

• Executive Summary
  • Core Views
  • Major Forecast Changes
  • Key Risks To Outlook
• Chapter 1: Political Outlook
  • SWOT Analysis
  • BMI Political Risk Ratings
  • Domestic Politics
  • Reconciliation Unlikely In 2013
  • While Cote d'Ivoire's economy continues to power ahead, political reconciliation in the sharply divided country is likely to remain stalled
  • in 2013. Attacks on military bases in the capital have continued, and the recent arrest of several gendarmes highlights divisions within
  • security forces. Even so, BMI retains the view that the tense security situation is unlikely to threaten the government's control over the
  • country or substantially derail its economic recovery
  • Long-Term Political Outlook
  • The Long Road To Reunification
  • Over the next 10 years, the primary political goals will be reducing endemic poverty, addressing identity politics and unifying
  • administration of the country. The risk of rebellions and coup attempts will remain high for the foreseeable future
    • TABLE: POLITICAL OVERVIEW
• Chapter 2: Economic Outlook
  • SWOT Analysis
  • BMI Economic Risk Ratings
  • Economic Activity
  • Growth To Stabilise Just Below 8.0%
  • Economic growth in Cote d'Ivoire will average 7.6% between 2013 and 2017, but will not match the 8.4% that we are estimating for
  • 2012. Real GDP growth in 2013 will fall to 7.5% on account of base effects, and then subsequently trend upwards as the economy
  • recovers from its 2010-2011 crisis. President Alassane Ouattara's ambitious investment plan will boost Cote d'Ivoire's economic
  • recovery, but we believe that growth will fall below the government's goal of double-digit expansion
    • TABLE: ECONOMIC ACTIVITY
    • TABLE: CURRENT ACCOUNT
  • Balance Of Payments
  • Economic Diversification To Boost Exports Eventually
  • Stagnation in Cote d'Ivoire's cocoa sector will contribute to a mild current account deficit over the coming years. In the longer term,
  • however, we believe that the development of other export industries (notably gold) will boost exports and narrow the country's current
  • account shortfall. Over the duration of our 2013-2017 forecast period, the country's current account will remain vulnerable to shifts in the
  • cocoa sector
  • Monetary Policy
  • UEMOA Inflation To Remain Low
  • Month-on-month price growth in West Africa's XOF franc zone fell from 0.31% in September 2012 to 0.16% in October on the back of
  • falling food prices in the bloc's inland economies and lower fuel costs in coastal Benin. We believe that inflation across the region will
  • remain low into 2013, though there may be a mild retracement as the effects of the autumn harvest abate and food prices rise slightly
  • Our 2013 inflation forecast for Cote d'Ivoire, the region's core economy, is 1.5% in annual terms
    • TABLE: MONETARY POLICY
  • Fiscal Policy
  • Surging Capital Expenditure To Slow Fiscal Consolidation
  • While Cote d'Ivoire's fiscal deficit is recovering from its crisis-induced peak in 2011, we believe that rapidly growing capital expenditure
  • and slowing growth will prevent the shortfall from closing. We predict a fiscal deficit worth 2.9% of GDP in 2013, a slight improvement
  • from the 3.5% deficit that we estimate for 2012. As growth slows, however, we anticipate that the fiscal shortfall will remain above 2.0%
  • over the duration of our 2013-2017 forecast period
    • TABLE: FISCAL POLICY
  • CoTE D'IVOIRE Q2
  • Key Sector Outlook
  • Power Sector To Grow, But Business Environment Still A Risk
  • In line with our optimistic forecasts for economic growth in Cote d'Ivoire, we foresee robust growth in the country's power sector. We
  • believe that improvements to power infrastructure will allow for the development of new industries (especially cocoa grinding) and will
  • boost electricity exports. That said, we predict that the country's difficult business environment and confusing regulatory framework will
  • keep growth below potential
• Chapter 3: 10-Year Forecast
  • The Ivoirien Economy To 2022
  • Political Risk Still Drags Growth Below Potential
  • While growth over the next 10 years is expected to improve on the last decade, political uncertainty continues to exert a downward pull
  • on the country's potential. In our view, high poverty levels and a frail business environment will represent the main obstacles to growth
  • over the longer term
    • TABLE: LONG-TERM MACROECONOMIC FORECASTS
• Chapter 4: Business Environment
  • SWOT Analysis
  • BMI Business Environment Risk Ratings
  • Business Environment Outlook
    • TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
    • TABLE: BMI LEGAL FRAMEWORK RATING
    • TABLE: LABOUR FORCE QUALITY
  • Market Orientation
    • TABLE: AFRICA - ANNUAL FDI INFLOWS
    • TABLE: TRADE AND INVESTMENT RATINGS
    • TABLE: TOP EXPORT DESTINATIONS (US$MN)
  • Operational Risk
• Chapter 5: BMI Global Assumptions
  • Global Outlook
  • Growth May Be Turning The Corner
    • TABLE: GLOBAL ASSUMPTIONS
    • TABLE: DEVELOPED STATES, REAL GDP GROWTH FORECASTS
    • TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS (%)
    • TABLE: EMERGING MARKETS, REAL GDP GROWTH FORECASTS