Cameroon: Risk Assessment
Country Rating1
Rating: C
Business Climate Rating1
Rating: C
Risk Assessment2
GDP growth has been recovering, fueled by domestic demand and the mining sector
Economic growth has gradually accelerated and in 2011, as in 2010, it will be driven by the mining sector (including aluminum) and higher public spending. Mining investment increased sharply in 2010 and several mines are expected to go into production in next few years. In contrast, the contribution to growth made by the oil sector - which represents nearly 10% of GDP and about 50% of exports - remains negative. And in 2011, crude production will likely fall below the 60,000-barrrels-per-day threshold, compared to 86,000 bpd on average in 2006-07. It will temporarily recover, however, from 2012 to 2014, after the operational start-up of new wells. Measures taken by the government - to curb speculation and improve the supply of consumer staples - have been instrumental in limiting inflation, which depends substantially on food products and fuel import price trends.
Many challenges to take up
The economy's vulnerability to fluctuations in foreign demand and world raw-material prices was again highlighted during the international crisis and was the main reason why the IMF granted Cameroon a $144-million Exogenous Shocks Facility in 2009. Efforts remain to be undertaken to expand non-oil resources, improve the management of public spending and fiscal transparency, and make the business environment more attractive. An important objective is to strengthen the role of a banking sector with its lending highly concentrated on a single borrower (the national oil refinery) which has suffered from delays in payments from the government. Public and external debt ratios have, nonetheless, given little cause for concern since improving sharply as a result of the debt relief granted under the HIPC and MDRI initiatives. But Cameroon continues to struggle to reduce poverty. To spur growth, it will have to strengthen the banking sector, develop infrastructure and the farm and mining sectors, diversify exports, promote greater commercial integration at the regional level, and improve the quality of the labor force.
Political continuity but with latent tensions
In power since 1982, President Paul Biya (age 77) continues to dominate the political scene and is expected to run for a third term in the October 2011 presidential election. He will probably win without much difficulty against a marginalized opposition, weakened even more by the split in its ranks over divergent positions on whether to boycott the election. The ruling party is moreover well positioned to win the legislative elections the following year. But, in addition to the question of the president's ultimate succession, a number of issues pose risks not to be neglected: dissension within the armed forces, ethnic and regional rivalries, and popular discontent over the standard of living, unemployment and the lack of social safety nets.
Strengths
- Diversity of agricultural resources (cocoa, coffee, tobacco, cotton, bananas) and raw materials (wood, aluminum, rubber)
- Energy potential (oil, gas, hydroelectric power)
- Debt relief under the HIPC and MDRI initiatives (2006) and support from donors
Weaknesses
- Vulnerability to falls in prices or production of raw materials
- Depletion of oil resources expected towards 2017
- Unfavorable business environment
- Stagnation of real GDP per capita
- Public finances in need of further consolidation
- Infrastructure deficiencies, governance shortcomings