Cote d'Ivoire: Risk Assessment
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Business Climate Rating
- Variety of resources: agricultural wealth (world's largest producer of cocoa, coffee, sugar, cashew nuts, rubber), hydrocarbons and ore (gold, copper, iron, manganese, bauxite)
- Infrastructure undergoing modernization
- Expanding middle class, although poverty still affects 30% of the population and child labor has not been eradicated
- Improving business climate and governance
- Inflation kept in check through membership of the WAEMU and its common currency
- Vulnerable to climatic hazards and changes in the price of cocoa, the main export product
- Deficiencies remain in the management of public finances, infrastructure, access to banking services and the business environment, despite the progress made
- Low government revenues (about 15% of GDP)
- Massive informal economy: 90% of employment and 70% of added value; illegal cocoa production undermines prices
- Large wealth gap between Abidjan and the rest of the country
Robust economic recovery
In 2022, the economy was expected to thrive, driven by robust domestic demand. The investment will increase supported by the implementation of the National Development Plan (NDP) for 2021-2025, with the extension of the port of Abidjan, the Abidjan-Dakar (Senegal) highway, the development of transport infrastructure with Niger and Burkina Faso, infrastructure related to the organization of the 2023 African Cup of Nations football tournament, and Abidjan Metro. Foreign investment will also likely gain momentum in agriculture and the oil and gas industry. Eni, an Italian energy major, announced a significant offshore oil discovery (Baleine) in September 2021. As the company is fast-tracking the project with the ambitious goal of starting oil and gas production in 2023, capital expenditures on oilfield development could be massive this year. While the risk of new COVID-19 waves is still high due to the low inoculation rate (less than 5% of the population fully vaccinated in November 2021), household consumption is likely to continue on its upward trend the vaccination campaign against COVID-19 progresses. The 17.5% lower farmgate price for cocoa set by the Coffee-Cacao Council for the 2021/22 season could limit its expansion. The crop is estimated to provide a living for about 20% of the population. Government consumption will remain supportive as public spending will remain high on education development, job creation, and vaccine procurement. While economic prospects are positive, net exports are likely to drag on growth, as cocoa exports (nearly 34% of total exports) are not expected to grow significantly in 2022 because of unfavorable weather conditions and the vegetative rest of cacao trees after three consecutive strong productions. As a fuel, consumer, and capital goods, imports continue to rise.
Twin deficits likely to remain significant in 2022
The account balance deficit is expected to widen slightly in 2022 despite a merchandise trade surplus. The latter could decline, as it will weigh on limited export growth due to cocoa exports and rising imports. The services deficit is likely to widen as technical and construction services imports serving the implementation of the NDP rise. The primary and secondary income accounts will also contribute to the current account deficit. The former is fuelled by investment profit repatriation and interest payments on debt, while the latter is burdened by remittances sent by migrants working in Côte d’Ivoire. Financing will remain assured mainly by a mix of FDI, concessional external financing, and portfolio investments.
The public budget balance remains in deficit and should gradually narrow towards the WAEMU objective (3% of GDP) in 2022. On the revenue side, the fiscal consolidation effort will focus on broadening the narrow tax base, as the tax-to-GDP ratio remains below 13%. Eliminating certain tax exemptions and the continued modernization of tax and customs administrations should support growth in public revenues. The authorities will also aim to control recurrent expenditures, most notably the general wage bill (36% of revenues in 2021), to prioritize capital spending to achieve the objectives of the NDP. The deficit will be financed mainly through domestic borrowing and, to a lesser extent, through project loans from bilateral and multilateral partners. The external share of public debt (67%) has been growing with several Eurobond issuances in recent years. The risk associated with debt is mitigated by the large percentage of debt denominated in EUR, to which the Franc CFA is pegged.
Slight improvement in the socio-political climate, but security concerns linger in the North
Alassane Ouattara, president since 2011, won the presidential election of October 2020 with 94% of the votes, as the main opposition parties boycotted his third-term bid. After a 2020 election marred by violence and unrest, the legislative election of March 2021 signaled a relative easing of tensions, as they took place peacefully with more extensive participation from opposition parties. The presidential party, Rassemblement des houphouëtistes pour la démocratie et la paix, obtained the largest number of seats (137 of 255) in the National Assembly. Furthermore, after several years of exile, former president Laurent Gbagbo returned to Côte d’Ivoire in June 2021 after the International Criminal Court confirmed his acquittal from alleged crimes against humanity in the post-election violence of 2010‑11. Mr. Ouattara met Mr. Gbagbo, sending a favorable sign in the post-2010 national reconciliation process. The progress made in recent months sends a positive signal to international investors. In addition, the NDP’s emphasis on improving the business environment, notably by reducing red tape and addressing corruption, contributes to a better business environment. However, while stability seems to be improving, the security situation has deteriorated with several attacks at the Northern border from Islamist terrorists active in the Sahel region.