Emerging

Well positioned to recover

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Eco Emerging // 2 quarter 2021  
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3
IVORY COAST  
WELL POSITIONED TO RECOVER  
So far, the economy has posted a fairly good resilience to the pandemic shock. Although economic growth slowed  
sharply in 2020, it nonetheless remained in positive territory. Above all, the economy is expected to rebound strongly  
this year, buoyed by domestic demand and easing political tensions after a busy electoral calendar. The country’s  
debt situation is also not as alarming compared to the other African countries. Even so, the sharp deterioration in  
public finances in 2020 calls for fiscal consolidation, which could prove to be difficult without a sustainable increase  
in fiscal revenue. This could weigh on the growth prospects of an economy that is increasingly dependent on public  
investment.  
The horizon is getting brighter. President Ouattara was re-elected in  
November 2020 after a campaign season seeped in violence, in which  
the opposition refused to participate, contesting the incumbent’s  
legitimacy to run. The busy electoral calendar came to an end with  
legislative elections in early March. The presidential party RHDP  
managed to conserve its majority against a reinvigorated opposition.  
More importantly, the legislative elections were held without major  
incidents, paving the way for a less tense political environment.  
Investors were also reassured by the continuity of economic policy,  
as illustrated by the country’s successful return to the international  
financial markets in November 2020 and again in February 2021. With  
average growth of 8% since 2012, President Ouattara has a positive  
economic track record for his first two terms in office. Ivory Coast is  
also one of the few African countries that managed to avoid recession  
in 2020, thanks notably to good control over the pandemic, and the  
deterioration of public and external accounts was less significant than  
most of its peers. The economy is thus expected to rebound strongly  
this year. Even so, the situation is not without risks.  
FORECASTS  
2019  
2020e  
2021e  
2022e  
Real GDP growth (%)  
6.2  
0.8  
1.2  
2.4  
5.5  
2.5  
6.5  
2.0  
Inflation (CPI, year average, %)  
Gen. Gov. balance / GDP (%)  
Central. Gov. debt / GDP (%)  
Current account balance / GDP (%)  
External debt / GDP (%)  
-2.3  
38.8  
-2.7  
27.6  
7.4  
-5.6  
47.8  
-3.9  
31.9  
8.9  
-4.7  
48.6  
-3.6  
32.4  
8.8  
-3.5  
49.2  
-3.2  
32.1  
8.7  
Forex reserves (USD bn)  
Forex reserves, in months of imports  
6.8  
8.6  
7.6  
6.7  
e: ESTIMATES & FORECASTS  
TABLE 1  
SOURCE: BNP PARIBAS GROUP ECONOMIC RESEARCH  
DETERIORATION OF PUBLIC FINANCES  
PUBLIC FINANCES: GRADUAL CONSOLIDATION  
%
of GDP  
Budget balance  
Government debt (RHS)  
The consolidation of public finances will be one of the main challenges  
to address. Budget deficit more than doubled to 5.6% of GDP in 2020  
-6  
-5  
-4  
60  
50  
40  
30  
20  
10  
0
(
chart 1), mainly due to an increase in expenditure of more than  
3
5
percentage points. Government revenue (excluding grants) fell  
% short of the initial target, but was nonetheless fairly resilient  
(
+4% year-on-year), which spared the government from having to  
-
-
-
3
2
1
0
reallocate spending. As a result, public investment rose nearly 30%  
in 2020, whereas cuts were being considered at the beginning of the  
health crisis. According to the IMF, Ivory Coast should trim its budget  
deficit to 4.7% of GDP in 2021 before gradually converging with the  
economic and monetary union’s target of 3% of GDP by 2023. The path  
to fiscal consolidation would thus help to keep government debt below  
5
0% of GDP without undermining the economic recovery.  
2
015  
2016  
2017  
2018  
2019  
2020e  
2021f  
2022f  
Although the situation as a whole still seems manageable, numerous  
factors weigh on fiscal prospects. Prior to the health crisis, Ivory  
Coast reported one of the region’s worst performances in terms of tax  
CHART 1  
SOURCE: MOF, IMF, BNP PARIBAS  
collection at only 12% of GDP, reflecting a relatively complex fiscal So far, this has been achieved through strict control over current  
system with numerous exemptions. The gradual withdrawal of support spending, in particular the wage bill of public sector employees, which  
measures introduced during pandemic is unlikely to have more than a accounted for 25% of total expenditures in 2020 down from 32.2% in  
very mild effect on the fiscal performance: estimated at 1.5% of GDP 2014. Yet the fragile social context in the aftermath of the health crisis  
in 2020, the emergency package will only be reduced by half a point as well as the busy electoral calendar fuel risk of slippages on this  
in 2021. To reduce the deficit, the government is also counting on an front, which means that public investment may have to play the role of  
upturn in fiscal revenues generated by the economic rebound as well as adjustment variable. There is some manoeuvring room, however, since  
on fiscal reforms. Caution is warranted, however, based on a repeated capital expenditure accounts for more than a quarter of the budget. Yet  
series of poor performances in the past. Another source of concern is this can only be a temporary solution.  
the authorities’ ability to contain the growth of expenditures.  
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DEBT IS SUSTAINABLE BUT NEEDS TO BE MONITORED  
CLOSELY  
INVESTMENT RATE  
%
25  
of GDP  
Compared to other African issuers, the Ivory Coast’s debt situation  
looks to be less risky, in terms of the level and structure. But its upward  
momentum needs to be contained. On the positive side, the next peak of  
amortization of Eurobonds are not until the end of the decade. Indeed,  
although Eurobond issuances in recent years have increased the share  
of external debt held by private creditors (33% of debt outstanding at  
year-end 2020, up from 24% in 2013), they also have served to extend  
its maturity. The average maturity of the debt has increased from  
Public  
Private  
5.0  
4.1  
2
1
0
5
4.9  
4
.4  
5.4  
5
.3  
5
.2  
3
.3  
10  
5
1
8.8  
18.7  
5
.5 years in 2013 to 8.3 years in 2020. As Ivory Coast taps the market  
mainly in euros, debt vulnerability to exchange rate is also contained  
thanks to the peg.  
16.2  
16.6  
1
5.7  
1
4.9  
14.5  
12.3  
Covering financing needs should not be difficult. The country continues  
to be supported by donors and has regular access to the local and  
international financial markets. Moreover, the country’s participation in  
the G20 debt moratorium did not reflect any strong liquidity pressures.  
The gains were small (0.4% of GDP in 2020) and will remain that way  
in 2021. Like the other eligible countries, the government did not want  
to include private creditors in order to preserve its attractiveness  
and credit quality with the rating agencies. Among other factors, this  
0
2
012  
2013  
2014  
2015  
2016  
2017  
2018  
2019  
CHART 2  
SOURCE: BCEAO, NATIONAL STATISTICAL OFFICE  
explains the relatively low level of Ivory Coast’s sovereign spreads, According to the IMF, this concerned only 5% of bank credit outstanding  
which are less than 400 basis points.  
However, the rise in public debt (+20 points of GDP since 2014) and  
a greater recourse to international debt markets have also led to a  
in mid-2020 at the Western African Economic and Monetary Union’s  
level. It is probable that credit risk, like economic growth, was more  
resilient in Ivory Coast than in the other economies in the region.  
sharp increase in the debt’s interest burden, which now absorbs In the short term, of course, the country’s economic rebound depends  
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3% of government revenues (excluding grants), up from 7% in 2014. on maintaining the pandemic under control. Granted, Ivory Coast was  
This situation risks getting worse unless progress is made towards one of the first African countries to receive vaccines thanks to the  
mobilising domestic resources. Reducing budget deficit will be also Covax initiative. Yet in early March, the vaccination campaign was only  
necessary.  
just getting underway and will be a very long process.  
Beyond that, maintaining a robust growth in coming years will be  
TOWARDS A REBOUND IN 2021, BUT UNCERTAINTY closely correlated to reforms. Despite undeniable potential, Ivory Coast  
growth model is still weakened by numerous structural fragilities,  
THEREAFTER  
starting with its increased dependence on public investment (chart 2).  
Yet the need to consolidate public finances will make it hard to maintain  
these dynamics. The decline in the private sector investment rate since  
The economy was fairly resilient to the Covid-19 shock in 2020. After  
a limited contraction to -1.6% y/y in Q2, growth returned into positive  
2
015 also reflects low structural transformation. Despite a broadening  
territory in Q3 (0.7%) following a significant easing of restrictive  
measures. Growth continued to gain momentum in Q4 (1.9%). The  
economy is modestly exposed to the tourism sector, and benefited  
from favourable terms of trade thanks to the resilience of global  
cocoa prices and fall in oil imports. As a result, it did not suffer from  
pressures other than the disruption of foreign trade generated by the  
pandemic. According to the Central Bank of Western African States  
of exports base, it is still concentrated on soft commodities, especially  
cocoa (more than 40% of exports). The economy is thus vulnerable  
to exogenous shocks. But growth is not inclusive enough either. All of  
these challenges are clearly included in the National Development  
Plan (2021-25).  
Completed on 9 April 2021  
(
BCEAO), growth is estimated at 1.2% in 2020, which nonetheless  
marks an abrupt slowdown.  
Stéphane ALBY  
In 2021, growth is forecast at between 5.5% and 6%, bolstered by  
the intensification of major infrastructure projects and the rebound  
in domestic demand. The upturn in imported commodity prices, and  
energy prices in particular, are likely to have only a mild inflation  
impact thanks to the stabilizing mechanisms of CFA franc. Inflation  
was only 2.3% in January 2021. Consequently, a premature tightening  
of monetary policy by the regional central bank (BCEAO) is unlikely. The  
key policy rate was lowered by 50 basis points to 4% in 2020, which  
helped support the growth of banks’ loans to the private sector (+11%  
y/y). In the short term, the lift of loan payment deferrals introduced  
during the crisis is expected to be manageable.  
stéphane.alby@bnpparibas.com  
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QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
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