Government Announcements Support BMI View
|Côte d'Ivoire - Real GDP Growth, BMI & Government Forecasts|
BMI View: A London speech by President Alassane Ouattara has supported BMI 's bullish outlook for the Ivoirien economy in 2012. We believe that a combination of political stability and the government's ambitious investment programme will cause growth to surge to 8.0% this year. While we share the president's optimistic view of his country's mining potential, we believe that growth over the long term will fall below the government's double-digit target.
Ivoirien president Alassane Ouattara, in London for the opening of the 2012 Olympics, recently gave a speech at Chatham House outlining his government's plans to make Côte d'Ivoire a major pillar of stability and growth in West Africa. BMI holds a bullish outlook for Côte d'Ivoire's economy, and the president's speech confirmed several of our views. The government's outlook for the country's growing mining sector was particularly close to our own forecasts. In other sectors, however, we are more pessimistic. Overall, BMI is predicting slower - though still respectable - growth over the long term; our forecast of 8.0% expansion this year is due to a base effect and will not set a trend.
BMI holds an optimistic view of Côte d'Ivoire's economic revival following its long period of political instability, but we doubt official projections of double digit growth over the next five years. Growth on the scale predicted by the government would require investment to increase by an annual rate above 30% and for domestic consumption to surge. BMI believes that lingering political risks following the country's 2010-2011 post-electoral crisis will prevent foreign direct investment from rising at these rates and see domestic consumption restrained by entrenched poverty and weak infrastructure (see July 19 'Growth To Lag Government Forecast' on our online service).
|Côte d'Ivoire - Gold Production, BMI & Government Forecasts|
In the gold sector, however, we share the Ivoirien government's optimism. BMI has long held that Côte d'Ivoire's gold resources, which are located in territories that were, prior to Ouattara's election, controlled by rebel forces, offer a substantial opportunity now that the country has been reunified. New government forecasts support our view, seeing gold production rise by over two thirds between now and 2015. Our Mining Team's forecast of 23,668 tonnes in 2015 is only a shade below the government's 25,000 tonne production target.
We predict that rising gold production, combined with the country's nascent off-shore oil potential, will slowly decrease Côte d'Ivoire's dependence on the agricultural sector, which currently represents almost a third of the economy and employs the majority of the population. This transition will, however, be gradual, and it is a less optimistic view for this vital sector that brings BMI's growth forecast below the government's.
|Côte d'Ivoire - Historical Rice Production & Government Forecast|
The government's ambitious plans for rice production, however, are an example of where BMI holds a substantially more negative view than the Ivoirien authorities. As we have noted before (See April 19 'Government Seeks To Boost Rice Production') BMI believes that the government's aim of producing 2mn tonnes of rice in 2018 is over-ambitious. President Ouattara's recent statement that production could be eventually raised to 5mn tonnes strikes us as implausible, at least in the medium term.
BMI views with cautious optimism the government's plans to reform the Côte d'Ivoire's economically vital cocoa sector. We estimate that Cocoa will make up 34% of exports in 2012. A government plan to guarantee farmers a greater share of the final price is a good step, but more details are needed before the full effects of the programme can be analysed (See August 3 'Fund To Increase Production').
The impact of the pricing change will be critical in determining whether the government can meet its goal of boosting domestic spending and reducing poverty. President Ouattara has said that he aims to halve his country's poverty rate by 2015; it currently stands at 50%.
Risks To Outlook
Our forecast of annual growth between 5.0%-7.0% over the period of 2013 to 2015 relies on foreign investment rising, but remaining constrained by residual political risks. A compelling signal that ethnic and political divisions have been put aside, or the discovery of new resources (eg more oil deposits) could boost investor confidence and increase growth. On the other hand a deterioration of the political situation, or a slowdown in key export partners could cause us to lower our forecasts.