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Cote d'Ivoire Country Risk Report Q2 2016

Cote d'Ivoire Country Risk Report Q2 2016

Core Views

Côte d'Ivoire remains our top Sub-Saharan African (SSA) growthpick in 2016, when the 8.7% real GDP expansion we anticipate willoutstrip the 7.8% growth we predict in our second-placed growthmarket, Ethiopia. Côte d'Ivoire stands out as offering serious growthpotential on an increasingly stable and diversified base. The countryis generating major investor interest and has been a popular topic ofdiscussion in BMI's meetings with clients over the past 12 months.

We project that Côte d'Ivoire's budget deficit will come in narrowlyin 2016, despite an expansionary budget which is expected to seespending rise by over 11%. Strong economic growth and an increasein revenues will combine to ensure that the deficit does not becomeunmanageable, despite, at 3.2% of GDP, being wider than usual –the average deficit over the decade to 2015 was 2.4%.

We project that Côte d'Ivoire's current account deficit will widenover the next several years, thanks to a combination of fallingcocoa prices and strong capital goods imports related to risinginvestment. Nevertheless, the shortfall will not exceed 3.5%, andif anything a wider current account deficit is a positive for Côted'Ivoire at present, as productive imports will help boost economicgrowth in the years to come.

The issuance of a French arrest warrant for the speaker of Côted'Ivoire's parliament, Guillaume Soro, has raised questions regardingthe state of Ivorian politics in the wake of the October 2015 elections.Namely, has there been a 'victors' justice' in the country over thepast five years, and will the newfound peace hold during the 2020presidential elections.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
A Good News Story In 2016
Recent quarterly data supports our expectation of strong real GDP expansion in Côte d'Ivoire over the next several years and the
country is our SSA growth pick. Strong investor interest and agricultural diversification will be the key drivers of this.
GDP By Expenditure Outlook
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Lower Taxes Will Counterintuitively Support Expansionary Budget
Côte d'Ivoire will run a budget deficit equivalent to 3.4% of GDP in 2016, moderately smaller than the 3.7% we estimate in 2015.
Although larger than the recent trend, this is a manageable level given the strong growth outlook for the West African country.
Structural Fiscal Position
External Trade & Investment Outlook
Current Account Deficit Will Widen As Investment Picks Up
Côte d'Ivoire's current account deficit will widen over the coming years due to falling cocoa prices and strong capital goods import
growth. This is a positive for the economy as it will boost future growth.
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Monetary Policy
UEMOA Policy Rate Will Be Maintained Through 2016
The common monetary policy rate of the eight UEMOA states will be maintained at the current 3.5% over the course of 2016. Inflation
will remain low, precluding the need for a hike, while buoyant growth and limited further pass-through will negate the benefit of any rate
cuts.
TABLE: TOP 5 GOODS EXPORTS IN 2014
TABLE: TOP 5 GOODS IMPORTS IN 2014
Monetary Policy Framework
Chapter 2: 10-Year Forecast
The Ivorian Economy To 2025
A Bright Decade Ahead, But Fragilities To Persist
While growth over the next 10 years is expected to improve on the last decade, political uncertainty continues to exert a downward pull
on the country's potential. In our view, high poverty levels and a frail business environment will represent the main obstacles to growth
over the longer term.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
'Victors' Justice' In Côte d'Ivoire Potential Flashpoint Ahead Of 2020 Vote
The issuance of a French arrest warrant for the speaker of Côte d'Ivoire's parliament, Guillaume Soro, has raised questions regarding
the state of Ivorian politics in the wake of the October 2015 elections. Namely, has there been a 'victors' justice' in the country over the
past five years, and will the newfound peace hold during the 2020 presidential elections.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Post-Conflict Challenges To Linger
While the establishment of a cohesive national government has set the stage for an impressive economic recovery in Côte d'Ivoire,
the country's political system remains brittle and ethnic tensions are easily inflamed. In our core scenario, BMI predicts that Alassane
Ouattara's government will be only partially successful in addressing the country's political, security, and social challenges and that
tensions will remain high over the coming years. A more stable outcome is possible, though highly unlikely, while we ascribe a 10-20
%probability to a repeat of the 2010-2011 political crisis between now and 2020.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Trade Procedures And Governance
TABLE: IMPORT AND EXPORT DOCUMENTS
TABLE: TRADE PROCEDURES BREAKDOWN
TABLE: SSA – TRADE PROCEDURES AND GOVERNANCE
Vulnerability To Crime
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Unfinished Business In 2016
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: COTE D`IVOIRE – MACROECONOMIC DATA & FORECASTS

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