Cameroon: Risk Assessment
Country Risk Rating
Business Climate Rating
- Relatively diversified resources, including forestry, agricultural, oil, and mining
- Hydroelectric potential
- Diversified economy, compared to those of other oil-exporting countries
- Efforts to upgrade infrastructure are underway
- Member of the Central African Economic and Monetary Community (CEMAC) and the Economic Community of Central African States (ECCAS)
- External and public accounts dependent on commodities
- Low government revenues: 13% of GDP
- Weak but the small banking system
- Non-inclusive growth (poverty affects 23% of the population), the business environment remains difficult with poor governance (corruption, etc.).
- Inadequate infrastructure, especially electrical infrastructure
- Heightened political risk: insecurity in the far north of the country and tensions in the northwest and southwest regions between the English-speaking minority and the mainly French-speaking regime
- Succession of President Biya (86 years old)
Infrastructure construction and gas support recovery
The COVID-19 crisis triggered a moderate recession in 2020. One of the causes was a decline in exports, which was partially offset by a decrease in imports. The other was the collapse in domestic demand, as investment was put on hold and consumption fell due to social distancing measures, even if they were not applied for long. In 2021, activity should rebound, but without returning to previous growth levels. This should be the investment case, with construction resuming on the Lom-Pangar and Nachtigal hydroelectric dams, the deepwater port of Kribi, and continued development of the gas sector, wood processing, and infrastructure for the African Cup of Nations 2022. Exports (19% of GDP) should benefit from better hydrocarbon prices. Shipments of liquefied natural gas should return to an upward curve with the commissioning of a new terminal in the port of Kribi. Coffee, cocoa, cotton, and bananas will benefit from the restoration of supply chains, but will still face persistent unrest in the English-speaking regions, which account for much of their production, while vegetable shipments will resume with the reopening of land borders. However, as, at the same time, imports of capital goods are set to pick up with investment and consumption, the contribution of foreign trade to growth will be reduced. Household consumption (70% of GDP), which already benefited from the lifting of social distancing measures, will get further support from the rise in income from agriculture (15% of GDP, but 62% of employment). Services (55% of GDP) are poised to benefit fully from this upturn.
Consolidation of public accounts likely to resume
The crisis only slightly increased the public deficit and debt, which remain moderate. The fiscal policy was rather restrictive before the crisis under the IMF's Extended Credit Facility, which provided the country with USD 666 million between 2017 and 2020. Admittedly, revenues were affected by the decline in demand, both domestic and external, and particularly by the fall in hydrocarbon revenues (16% of the total). Furthermore, the country introduced a modestly-sized support plan. However, significant cuts were made to current expenditure (not security) and investment, while fuel subsidies decreased as prices fell. The additional financing requirement was covered by emergency financing from the IMF to the tune of USD 226 million, the suspension of bilateral debt servicing by Paris Club countries and China, and recourse to the regional market. In 2021, the deficit should return to its previous level, while the debt-to-GDP ratio is expected to stabilize, although COVID-related spending could be prolonged. Higher hydrocarbon prices will be offset by a reduction in oil production, itself partially moderated by an increase in gas production. While amortization of the debt (80% external) will remain low, its increase from 2022 will likely encourage the authorities to seek a new IMF agreement.
Similar to the public deficit, the current account deficit increased moderately because of the crisis. The trade deficit widened modestly as the decline in imports partly offset the fall in exports. The trade deficit is significant but is largely attributable to imports linked to infrastructure development and the shutdown of Cameroon's only refinery (SONARA) following a fire in May 2019, which forced the country to increase its fuel imports. The deficit is financed by FDI flows linked to infrastructure projects and concessional debt. External debt represents only 30% of GDP. In addition to multilateral support, the country benefits, through its membership of CEMAC, from the CFA franc convertibility guarantee provided by the French Treasury.
The regime is facing an uprising in English-speaking regions
The economy is marked by the situation in the far north, which is exposed to terrorist attacks by the Islamist group Boko Haram, but even more so by what is going on in the English-speaking regions in the northwest and southwest. Complaints of marginalization and poor governance among the English-speaking populations led to the emergence of armed separatist groups, which the central government has been fighting since 2017. This has resulted in major abuses against civilian populations. In late 2020, separatists opposed to the learning of French carried out deadly attacks on bilingual schools. The country has an estimated 850,000 out-of-school children as well as 650,000 displaced people, in addition to Central African and Nigerian refugees. Under pressure from international donors wielding sanctions, a devolution law was passed in December 2019 that provides for special status for these regions. In July 2020, negotiations began between the government and separatist leaders, but their views look irreconcilable, with separatists demanding independence. The central government is dominated by President Paul Biya, who was elected for a seventh term in 2018 and whose party, the Rassemblement Démocratique du Peuple camerounais, won 139 of the 167 seats in the March 2020 legislative elections. Maurice Kamto, the main opponent, and other leaders of the Mouvement pour la renaissance are subject to sporadic arrests, like during the December regional elections, which they urged voters to boycott.