Country risk: Côte d’Ivoire risk score now on a par with Tanzania, Ecuador

By:
Jeremy Weltman
Published on:

Political tension and violence have marred Côte d'Ivoire for decades, but peaceful elections and an improving economy have raised expectations.

Cote d'Ivoire Alassane Ouattara-R-600
Alassane Ouattara celebrates his presidential win with a concert


The sovereign borrower rose 13 places in ECR’s global rankings in 2015, to 99th out of 189 countries surveyed, moving from tier 5, containing the world’s worst default risks, to tier 4, equivalent to a B- to BB+ credit rating.

All bar two of its 15 risk indicators improved, notably the score for political stability.

Fitch rates Côte d'Ivoire B+ (stable), having upgraded from B in December 2015. Moody's upgraded the sovereign in November to Ba3, equivalent to BB-, from B1 (there is no S&P rating).

The incumbent Alassane Ouattara easily won the October 2015 presidential elections, with a convincing majority in the first round, discouraging the opposition from challenging the results legally, or on the streets.

Post-electoral violence in March 2011 led to 3,000 deaths with many more people displaced. The outcome this time around is clearly more encouraging.

 

Bolstering confidence

Ouattara and his administration are gaining credibility from developing the infrastructure and maintaining social spending, with an economy shielded from the oil shock by a revitalized cocoa and coffee sector bolstering exports.

The reactivation of the port of Abidjan has improved the flow of revenue by acting as the main coastal access for throughput to and from landlocked neighbours Burkina Faso, Mali and Niger.

"GDP increased by 8.5% in real terms last year, supported by private consumption, infrastructure investment and the favourable terms of trade" notes Amina Coulibaly, the IMF’s representative in Côte d’Ivoire.

That makes it one of the fastest-growing countries in sub-Saharan Africa, at more than double the regional average.

"The poverty rate has fallen and the easing of political uncertainty paves the way for continued economic progress", she says.

 

Other ECR survey contributors paint a similarly bright picture.

Diery Seck, the director of research institute CREPOL, notes the diminished political and social tensions, and "growing lending from multilateral organizations, alongside the return of foreign direct investment aimed at capturing the vast potential of the country".

"Ouattara has committed to continuing the economic revival", says Isaac Matshego, an economist at Nedbank.

"The management of public finances is improving," he says, "with domestic debt repayment arrears expected to be cleared by the end of 2016."

The fiscal deficit increased to 3.7% of GDP last year, but is projected by the IMF to narrow. Public debt stabilized at 47% of GDP, and external debt amounting to 30% of GDP is forecast to fall.

Taking stock

All of ECR’s economic factor scores rose last year, especially bank and currency stability. Structural factors, such as infrastructure and demographics, are weak but also improving.

The country is far from a safe credit though. Its country risk score has improved tremendously, rising by 15 points over the past three years, but is still only totalling 36.5 out of a maximum 100 – a medium-to-high risk credit, albeit one that is at least out of the danger zone.

The IMF’s Coulibaly acknowledges that "global risks present challenges, potentially raising funding costs, harming export prices and weakening inflows of foreign direct investment".

Weather-related risks and the financial difficulties of national energy companies and publicly owned banks could also rise, she says, further worsening the fiscal and external deficits.

Seck notes the possibility of an uptick in civil strife, not least because of frustration over trials of militia personnel and high youth unemployment.

Other contributors have similar reservations, and yet in a region noted for its vulnerability and political turmoil the Côte d'Ivoire’s promising risk trend is clearly one to watch.

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