|Select Economic and Financial Indicators||2014||2015||2016||2017e||2018f|
|Real GDP (% change)||8.8||8.8||8.2||6.5||6.4|
|GDP (USD bn)||35.4||32.8||35.7||38.3||40.5|
|Fiscal Balance (% GDP)||-2.2||-2.9||-4.0||-4.5||-4.1|
|Broad Money (% change, end period)||13.8||17.0||11.0||17.0||16.8|
|Exports (USD bn)||13.9||12.5||11.4||10.6||11.9|
|Imports (USD bn)||12.2||11.3||10.4||11.5||12.0|
|Current Account Balance (% GDP)||1.4||-0.6||-1.1||-2.9||-2.9|
|FX Reserves (USD bn, end period)||3.4||3.3||2.3||3.0||3.2|
|Exchange Rate (average)||496.08||594.27||600.68||588.92||565.09|
Real GDP: We are cautiously optimistic about Côte d’Ivoire’s growth prospect in 2018 following a slowdown in 2017; the slowdown in growth was owing to renewed security risk by disgruntled ex-rebel soldiers, weaker industrial activity specifically in mining and petroleum refinery, and weaker cocoa prices, which undermined private consumption and government revenue. While concern over some of these shocks has eased, we expect some degree of second-round effects to continue to undermine growth in 2018, albeit remaining strong. Real GDP will be driven by strong expansion in the agriculture sector, as well as services (specifically trade, telecommunications and financial services). Growth will remain in the 6% range, below the government’s 8.3% projection for 2018, supported by factors alluded to above and measures under the government’s 2016-20 National Development Plan (NDP), which aims to make Côte d’Ivoire an emerging country by 2020. On this basis, public investment spending will remain strong, focusing on developments in road construction, transport and energy, providing opportunities for businesses. However, success of the NDP will depend on performance of the commodities market, and the government’s ability to exercise prudence in public financial management, reform the country’s army with the aim of achieving a lasting peaceful solution, implement the financial sector reform strategy and adequately secure external financing to boost its investment plans.
Inflation: Inflation will rise on the back of increased domestic demand, and higher oil prices, which will feed into pump prices. However, our expectation of a strengthening EUR bias in 2018 (and hence the XOF, which is pegged to the EUR) will help to limit the impact. Overall, we expect inflation to remain below UEMOA’s convergence criterion of 3%.
Fiscal balance: The fiscal deficit is expected to remain large in 2018, above 3.0% of GDP, due to higher demand for government services and growth in expenditure as the authorities continue to invest in the 2016-20 National Development Plan. In an effort to finance growing pressures, the government’s 2018 budget proposes a 4.3% rise to XOF6.7trn (USD12bn) with majority of the budget centred on discretionary spending; presumably, this includes expenses on wages/bonuses to the army and public sector workers. Of the total budget, about 27% has been earmarked for investment spending, but this is well below the amount required to transform the economy into an emerging market by 2020. This is despite possible gains in corporate and trade tax revenues given still weak global oil prices (albeit recovering). This should sustain low input costs for corporates, boosting tax revenue prospect, but such gains are likely to be eroded as oil prices increase (among other things). Similarly, while higher oil prices will bode well for the direct taxes on oil and gas, such tax revenue gains will be undermined by a possible rise in fuel subsidies, putting downward pressure on government finances. The government plans to accelerate its reform programme to strengthen the financial situation of the energy sector, and public financial management and controls with a view to avoiding above-budget spending, but the strong public investment drive alongside growing difficulties in the country’s key export earning sector (cocoa), and negative impact of higher oil prices will sustain high financing pressures.
Current account: The current account is likely to remain in deficit in the short term as higher oil prices and growing robust capital demand offset export revenues. As a net oil importer, the economy will be affected overall by the likely rise in oil prices in 2018. However, largely reflecting the EUR peg, the XOF should remain insulated from growing current account pressures, although currency volatility will increase.
In addition to the risks mentioned above in the growth section, there are several additional risks to the outlook.
- One of the main risks to the outlook is deterioration in the political environment. Although President Ouattara was re-elected in the October 2015 presidential election, given the recent political history and despite the marked improvement since 2011, the security situation remains fragile. The FPI, the main opposition party, could seek to disrupt the political balance, which could raise tensions, despite continuing efforts to strengthen security throughout the country.
- While efforts have been made to address discontent in the army and the civil service, there is a risk that tensions could reignite, resulting in further disruptions in economic activity, undermining investment prospects.
- Populism across EU countries has dissipated for now, but could ignite again weakening prospect for the EUR and hence the XOF, and resulting in higher volatility.
- Large XOF gains made in 2017 (via the EUR peg) has increased concern over a currency devaluation; however while this is possible, the likelihood of this happening in the short term appears low. This is owing partly to increased reform efforts, and a more positive commodity outlook, which are improving economic fundamentals.
- While progress will be made on some fronts, further progress is required on debt management, bank restructuring, and the energy sector.
- In addition, structural indicators such as GDP per capita and governance are weaker compared to regional peer economies, reflecting the impact of years of conflict.
Exchange Rate Structure
|Target||XOF655.957 to EUR1|
|Type of intervention||Via Central Bank|
|Market participants||Corporates (80%); Banks (20%)|
|FX Products||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Daily trading volume (USD mn)||n/a||n/a|
|Average trade size (USD mn)|
|FX Market Structure||BCEAO’s exchange regime is free of restrictions on payments and transfers for current international transactions, apart from restrictions maintaned for security reasons.|
|Non-resident FX Regulations||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Trade and FDI flow||A commercial underlying is required; proof of transaction needed in order to remit payments for imports.|
|Resident FX Regulations||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Trade and FDI flow||A commercial underlying is required; proof of transaction needed in order to remit payments for imports.|
|Primary Market||Treasury bills||Treasury notes||Treasury bonds||Central Bank bills||OMOs|
|End use||Government financing||n/a||Government & infrastructure financing||n/a|
|Maturity structure||28-days to 2-years||3- to 12-yrs|
|Daily trading volume||Up to XOF 50 mn||n/a|
|Average trade size||n/a|
|Ecobank local affiliate contact details:|
Ecobank Côte d’Ivoire, Immeuble Ecobank, Place de la République- Avenue Houdaille, 01 BP 4107 Abidjan 01
Tel: +225 20 31 92 00
|Côte d’Ivoire Debt||2014||2015||2016||2017e||2018f|
|Government debt (% GDP)||44.8||47.8||48.8||52.1||52.7|
|External debt (official creditors, % GDP)||24.5||29.2||27.7||31.7||32.2|
|External public debt stock (USD bn)||8.7||9.6||9.8||11.7||12.9|
|Share of total sub-Sahara debt (%)||3.5||3.8||3.4||3.7||3.7|
At end-2015 there were 24 commercial banks with active operations in Côte d’Ivoire, out of which 15 were foreign majority-owned. One bank, Diamond Bank, has passported its balance sheet out of Mali. Côte d’Ivoire is the largest banking sector in the West African Economic and Monetary Union (Union Economique et Monétaire Ouest Africaine, UEMOA). In 2015 total assets in the country’s banking system grew by 25% year-on-year (in local currency terms) to an equivalent of USD13.4bn. This growth was driven by a 30% year-on-year in customer loan book and a 27% year-on-year growth in investment securities. On the funding side, total customer deposit liabilities grew by 23% year-on-year to an equivalent of USD9.7bn (see table below).
Key balance sheet items, USD millions
|Short Term Loans||2,240||2,560|
|Medium Term Loans||2,297||2,674|
|Long term Loans||157||208|
|Comptes ordinaires débiteurs||1,289||1,295|
|Interbank activity balances||1,741||2,187|
Funding and Deployment Activities
Côte d’Ivoire remains a loan-driven market, with loans and advances accounting for 55% of total assets. Loans and advances to customers grew by a compound 17% between 2010 and 2015. This growth was primarily driven by wholesale lending activities (lending to local and multinational corporates, as well as to large SMEs), which grew by a compound 24% over the same period. Relatively low borrowing rates by wholesale obligors are a key driver of growth; lending rates to wholesale obligors have declined by 160bps to average around 5% in local currency terms.
Wholesale lending drives loan books of Ivorian banks, accounting for nearly three-quarters of total outstanding loans at end-2015. However, the share of household/consumer lending dropped to 21%, having fallen from a peak of 39% at end-2010. This reflects the increased risked aversion of local banks to consumer lending.
In the absence of robust ring-fencing mechanisms, commercial banks have largely restricted consumer lending to clients with regular cashflow, especially the salaried. This has meant that the pool of new obligors has not grown at a sufficient pace to keep up with wholesale lending activities, resulting in the decline in the share. We expect the share of consumer lending to remain in the range of 20% over the next three years as banks maintain a risk-off stance.
On the funding side, commercial banks’ balance sheets are still reliant on deposits, with customer deposits accounting for 70% of all funding liabilities. Total banking system customer deposits grew by 10% year-on-year in local currency terms to an equivalent of USD9.7bn at end-2015. Current account liabilities dominate commercial banks’ funding profile, accounting for 56% of total deposit liabilities. In total, sight deposits (current and term) accounted for 78% of total deposit liabilities.
Funding activities also dominate earnings
Lending activities, which drive commercial banks’ balances, also drive their income statements. In FY2015, data from BCEAO indicate that income from loans and advances to customers accounted for 55% of gross revenues. On a net basis, commercial banks derived 65% of their net revenues from funding activities. Total net revenues, in local currency terms, rose by 36% in FY2015 to an equivalent of USD1bn. This growth has helped maintain the low cost of balance-sheet funding and reduce loan loss provisions. However, commercial banks still have operational inefficiencies, resulting in PBT making up only around 25% of net revenues.
Asset quality in Côte d’Ivoire remains an issue. In FY2015, 20% of commercial banks’ gross customer loan book revenues was impaired by provisions for loan losses and classifications. However, this was a reduction from the 33% levels in FY2014. The industry gross non-performing loans (NPL) ratio, the key measure of loan book quality, declined by 100bps to 10% in FY2015, but we expect it to rise once more on account of low recoveries and loan reclassifications.
Convergence between banks and telcos is needed to boost financial inclusion
At end-2015 the number of bank accounts in Côte d’Ivoire grew by 3% year-on-year to 2.6mn, one third of the total bank accounts in the UEMOA region. However, this represented just 12% of Côte d’Ivoire’s total population in 2015, leaving 88% of the population without access to formal financial services. Given that there are over 27mn mobile phone subscribers, there is a huge opportunity for commercial banks and mobile telecommunications companies (telcos) to work together to deliver financial services to the majority of the population. There are already 7.5 million mobile money subscribers, a penetration rate of 27%, and this is set to grow to 50% of the population by 2020.
Hydrocarbon & Mineral Production
Côte d’Ivoire is a modest crude oil producer, with output averaging 45,000 bpd in 2017. The government is keen to ramp up output to 100,000 bpd by 2020, prompting several oil companies to conduct exploration & appraisal activities. Côte d’Ivoire produces an estimated 180mn cubic feet per day of gas largely from its deep-water fields operated by Canadian Natural Resources. Over the next few years gas production is expected to decline as a result of field maturity, creating a supply shortage. Côte d’Ivoire has approached Nigeria to join the West Africa Gas Pipeline (WAGP) in the hopes of securing some gas supply from Nigeria.
Côte d’Ivoire’s only refinery, Société Ivoirienne de Raffinage (SIR), is one of the few refineries in Africa with participation from a major oil company. The refinery is jointly owned by the Ivorian government (48%), Total SA (27%), Luanda Sonangol (20%), and the government of Burkina Faso (5%). Although Côte d’Ivoire consumes only 28,000 bpd of its own crude production, SIR refines over 64,000 bpd; the balance is made up by imports of crude oil from Nigeria. Côte d’Ivoire is a key supplier of petroleum products to Nigeria, Ghana and other West Africa countries.
Côte d’Ivoire’s mining sector is dominated by production of gold, with estimated output of 25 tonnes in 2016. The country also produced 20,235 carats of alluvial diamonds in 2016, and 118,000 tonnes of manganese ore.
Soft commodity production
Côte d’Ivoire is the world’s leading producer of cocoa, with record output of 2.01 mn tonnes in 2016/17 (October-September), equal to 42.8% of world output. Major reform of the sector has been implemented by the cocoa regulator, Conseil du Café-Cacao (CCC), which has enforced a mandatory fixed farmgate price, tightened quality controls and introduced a forward selling auction for exporters. High fixed prices have driven a surge in new planting and improved husbandry, boosting output. However, the slump in world cocoa prices has forced the CCC to lower fixed prices in the 2017/18 season, which is expected to result in a drop in production as farmers focus on other crops.
Côte d’Ivoire is Africa’s leading cocoa grinder, with estimated grindings of 540,000 tonnes in 2016/17, 12.6% of the world total (only marginally behind the Netherlands). The government has long-term plans to expand grinding to over 50% of the annual crop, up from around 30% currently. However, there are questions over the commercial viability of the Ivorian grinding sector, given uncertainty over the cocoa export tax regime (the DUS) and strong competition from new grinding hubs in South-East Asia.
Côte d’Ivoire is also Africa’s largest producer of natural rubber (NR), with estimated output of 326,101 tonnes in 2015, most of which was exported to world markets. The country is a leading producer of palm oil, with estimated output of 450,000 tonnes in 2017, a large proportion of which is exported to the sub-region. In recent years Côte d’Ivoire has dramatically expanded output of raw cashew nuts (RCN), producing an estimated 700,000 tonnes in 2017, equal to 21.1% of world output and only marginally behind the world’s largest producer, India.
Côte d’Ivoire is also reviving production of coffee and cotton, two crops whose output languished during the 2000s. Production of Robusta coffee rose to an estimated 2mn 60-kg bags in 2016/17, the highest level in three seasons. Cotton production has also rebounded, thanks to rising investment and improved regulatory support, notably the introduction of a fixed farmgate price. Production of cotton lint reached an estimated 149,000 tonnes in 2016/17, cementing Côte d’Ivoire’s place as West Africa’s fourth largest producer (after Burkina Faso, Mali & Benin). Côte d’Ivoire is also SSA’s fourth largest producer of milled rice, with estimated output of 1.43mn tonnes in 2016.
Commodity Trade Flows
Côte d’Ivoire’s imports totalled US$8.3 bn in 2016. Capital and consumer goods, crude oil, food and industrial raw materials made up the bulk of imports, some of which are re-exported to the sub-region (notably to landlocked Burkina Faso). Crude oil was the single largest import, worth US$840mn in 2016, most of which came from Nigeria for refining in Abidjan; a large proportion of this output is re-exported back to Nigeria with the balance consumed domestically. Imports of machinery & vehicles and ships totalled US$1.2 bn 2016, along with US$514mn of electronics and US$273mn of pharmaceuticals, reflecting the limited development of local manufacturing and the country’s role as a regional re-export hub. Despite producing large volumes of grain and pulses, Côte d’Ivoire is dependent on food imports, importing US$459 mn of rice (9.1% of SSA’s rice imports), US$143 mn of wheat and US$498 mn of fish in 2016.
Côte d’Ivoire’s exports totalled US$10.7 bn in 2016. The country is one of Sub-Saharan Africa’s leading soft commodity exporters, accounting for 14.2% of the total in 2016. Cocoa and cocoa products were the largest export in 2016, totalling US$5.7 bn, most of which were exported to Western Europe. Côte d’Ivoire exported petroleum products worth US$652mn in 2016, reflecting the country’s role as a regional refining hub, as well as US$600mn worth of crude oil. Côte d’Ivoire also exported US$503mn worth of gold, making it West Africa’s fourth largest exporter of the metal (after Ghana, Burkina Faso & Guinea). The rest of Côte d’Ivoire’s commodities are exported raw to world markets, including rubber (US$726mn, equal to 45% of SSA’s rubber exports), cashews (US$395mn), bananas (US$372mn), coffee (US$274mn), wood (US$190mn), cotton (US$136mn) and palm oil (US$130mn). All of the country’s palm oil is exported as refined product to other UEMOA markets. Around two thirds of Côte d’Ivoire’s coffee exports go to Algeria & 20% to Spain & Italy, reflecting these countries’ preference for the country’s bitter Robusta variety.