Côte d’Ivoire: Election clouds robust growth outlook - Capital Economics
Africa Economics

Côte d’Ivoire: Election clouds robust growth outlook

Africa Economics Update
Written by Virag Forizs

Côte d’Ivoire’s upcoming elections in 2020 raise political risks facing the economy. But our core view is that the vote will pass peacefully, and that looser fiscal policy combined with more favourable external conditions will boost growth to 7.5% next year.

  • Côte d’Ivoire’s upcoming elections in 2020 raise political risks facing the economy. But our core view is that the vote will pass peacefully, and that looser fiscal policy combined with more favourable external conditions will boost growth to 7.5% next year.
  • Côte d’Ivoire’s economy has expanded at a rapid pace in recent years; growth averaged 8.7% between 2012 and 2018. Structural reforms aimed at improving the business environment helped draw in large investment inflows. Foreign direct investments have nearly tripled since 2012.
  • This year, the economy is facing headwinds from lower commodity prices that have weighed on export earnings. In a bid to reduce the budget deficit to 3% of GDP, the government has tightened fiscal policy. We expect that GDP will grow by 7.0% over 2019 as a whole, down from 7.4% in 2018.
  • There are two key reasons why we think that the economy will fare better in 2020. First, prices of the country’s key exports – cocoa and oil – are likely to rise. We estimate that the overall improvement of the country’s terms of trade next year will be equivalent to 0.6% of GDP. (See Chart 1.)
  • Second, the economy is likely to get a lift from more supportive policy. The country’s membership in the West African Economic and Monetary Union’s euro-pegged common currency means that monetary policy will follow that of the ECB, which has already cut rates and re-launched its quantitative easing program. We think that more easing lies in store.
  • Meanwhile, the authorities will probably loosen the fiscal purse strings ahead of elections scheduled for October 2020. The country’s commitment to keep the budget deficit within 3% of GDP, reinforced by the recent extension of an IMF deal, is likely to waver. With more supportive fiscal policy and a pick-up in the commodities sector, we think that GDP will expand by 7.5% in 2020. (See Chart 2.) We expect that Côte d’Ivoire will remain a regional outperformer.
  • The main risk to the outlook stems from political uncertainty surrounding the 2020 polls. Contested election results plunged Côte d’Ivoire into chaos and violence in 2010; the economy contracted by 4.9% the following year. The social cleavages that motivated violence in 2011 remain entrenched. And if President Alassane Ouattara runs for a controversial third term, this might further divide the country. Another political crisis could endanger many more lives, and the economy will inevitably suffer.
  • However, so long as the vote passes peacefully, we think that GDP growth will remain robust next year and over the longer term. The business-friendly environment is likely to boost Côte d’Ivoire’s economy, even as the investment boom matures.

Chart 1: Change in Net Export Incomes Caused by
Commodity Price Moves (% of GDP)

Chart 2: GDP (% y/y)

Sources: Refinitiv, Capital Economics

Sources: Refinitiv, Capital Economics


Virág Fórizs, Emerging Markets Economist, +44 20 7808 4079, virag.forizs@capitaleconomics.com