Cote d'Ivoire: Risk Assessment
Country Risk Rating
|B||Political and economic uncertainties and an occasionally difficult business environment can affect corporate payment behavior. Corporate default probability is appreciable.|
Business Climate Rating
|C||The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.|
Growth driven by major public works, improved business climate and strengthened political stability
All sectors have performed well in 2015 in connection with the implementation of various reforms (including the overhaul of the cotton, cashew, coffee and cocoa sectors) and the 2012-2015 National Development Plan. Cash crops have driven the primary sector (new record cocoa crop). The good results of the construction and public works, agrifood, energy and gold sectors have boosted the expansion of the secondary sector. Finally, the dynamism of transport, telecommunication and financial service sectors has supported activity in the services sector. However, oil production has declined due to the production stoppage of a field and the gradual depletion of other producing deposits.
Economic activity should remain dynamic in 2016 thanks to the continuation of major public works under the 2nd National Development Plan (2016-2020), improved business climate, support measures for the private sector and strengthened political stability. These factors, which support investment, should offset the negative impact on tourism of the attack in the seaside resort of Grand Bassam in March 2016. Moreover, guaranteed prices to farmers, the establishment of a universal health cover and the rise in the minimum wage and the wages in the civil service should continue to drive consumption. However, agricultural activity could suffer from drought as a result of the climatic phenomenon El Niño.
Growth remains broadly exposed to commodity price fluctuations and is still constrained by outdated infrastructure. However, the economic recovery since the end of the post-electoral crisis has helped raise the population's living standards and thus to stimulate household consumption.
A slight increase in the current account deficit and an appropriate public finance management
The current account deficit has widened slightly in 2015 as a result of a significant increase in imports of consumer goods and building materials, which has offset improved terms of trade due to higher cocoa prices; lower oil prices and the depreciation of the CFA franc against the dollar. In 2016, the current account deficit should continue to grow in value, due to a slight drop in cocoa exports and the continued rise in imports, but remain roughly stable in relation to GDP. The expected increase in foreign direct investment will help finance this deficit.
The performance criteria under the program supported by the IMF’s Extended Credit Facility (which expired at the end of 2015) have been met. Business climate and tax administration have improved significantly and progress have been recorded on the restructuring of State-owned banks, although the banking sector soundness indicators have deteriorated in 2015 due to rapid credit growth. The fiscal deficit has remained under control in 2015, as the authorities have made certain adjustments (raising additional revenue and squeezing of some expenditure).but is expected to increase from 2016 due to rising capital and security expenditure, as well as rising interest payments. However, it is important to take into consideration the risks to public finances arising from financial difficulties of the oil sector (production and refining) and of a public bank (CNCE). The successful Eurobond issues in 2014 and 2015 have helped finance the budget. The debt burden has decreased substantially since the debt relief granted to the country in 2012 under the HIPC/MDRI initiatives.
Strengthened political stability
The political and security climate had already improved substantially in recent years. The presidential election of October 25, 2015, which ran smoothly and resulted in the re-election in the first round of the outgoing President Alassane Ouattara, allowed the country to finally turn the page on the violence which bloodied the country after the 2010 presidential election. Nevertheless, a part of the opposition called for a boycott, citing loyalty to former President Gbagbo (currently being tried by the International Criminal Court). The President will continue to rely on the governing coalition which is likely to be renewed in December 2016 parliamentary elections. He announced possible holding of a constitutional referendum in September or October 2016 (a simplification of eligibility rules for the presidency and the creation of a Vice-President position would be considered).