Côte d’Ivoire stages a comeback

By:
Jeremy Weltman
Published on:

High-risk sovereign rides trend improvement on the back of stabilizing political and security situation, boosting economic prospects.

On a score of 30.2 out of 100, and ranking 136th out of 186 countries surveyed, the Ivory Coast has jumped 11 places compared with a year ago to rise through the tier-five – highest risk – rankings. Its ascent has seen the sovereign leapfrog Ethiopia (one place below) and it is poised to overtake Egypt – less than half a point above in 135th spot.

 

Côte d’Ivoire is still a risky option. All five of its economic risk indicators score less than 5.0 out of 10; three of those, bank stability, the employment/unemployment sub-factor (providing a reasonable guide to social stability) and government finances score a paltry 3.0 to 3.5.

A budget deficit of some 3% of GDP (including grants) and an investment-fuelled current-account deficit (including transfers) at a similar level are vulnerable to deterioration, alongside an accumulation of new debts and arrears after debt relief secured last year as part of the heavily indebted poor countries initiative.

Political risk is even higher, with none of ECR’s six surveyed indicators scoring more than 3.7, but the return of government stability is raising the hope of president Alassane Ouattara surviving a full five-year term through to 2015 – a feature reflected in the rising score trend.

The value for government non-payment/non-repatriation has also increased in response to the resumption of aid inflows – an IMF financing programme in place since 2011 – the resolution of outstanding payments arrears and the benefits of strong economic growth generating fiscal revenue.

The country ranks 177th out of 185 countries in the World Bank’s Doing Business report, but the government is gradually putting in place a more-functioning business environment, presently blighted by high costs and burdensome red-tape, and there are efforts to introduce commercial courts, a one-stop-shop for enterprises and reforms of the cocoa and coffee sector.

All of which is helping the economy to recover briskly. Underpinned by better-functioning institutions and external financial support, GDP increased by 9.8% in real terms last year, with inflation averaging just 1.3%. Cocoa exports have increased by 15% during the first 11 months of the 2012/13 season, ending September, and the cashew crop is also predicted to be higher, according to local reports.

 

The government is able to spend more on reconstruction, and it needs it. Years of unrest have led to a neglected infrastructure; very low scores highlight the task in hand yet structural assessments by ECR experts are now improving across the board.

It might be a while before Côte d’Ivoire can contemplate tier-four status, but its upward score trend – one of the biggest movers in the region (see chart, above) is an important guide to risk in the absence of any ratings from the three main providers, Fitch, Moody’s and Standard & Poor’s.

This article was originally published by ECR. To find out more, register for a free trial at Euromoney Country Risk.