Côte d’Ivoire’s economy shows resilience amid global recession fears
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Côte d’Ivoire’s economy shows resilience amid global recession fears
Macroeconomic reforms have received top priority during President Ouattara’s government, partly because he applies his experience as a former IMF official in policy decisions. Due to the robust pre-crisis foundations, significant economic diversity, and early easing of fiscal policy, Côte d’Ivoire displayed remarkable resilience during the pandemic.
Agriculture supports more than half of Côte d’Ivoire’s labour, providing 21.4 per cent of the nation’s GDP and employing 40 per cent of the labour force. Côte d’Ivoire has enjoyed one of the highest continuous economic growth rates in Sub-Saharan Africa during the last decade. Real GDP growth has averaged 8.2 per cent.
Not with standing the challenging global economic situation, Côte d’Ivoire’s economy has been one of the few Sub-Saharan African countries to retain growth in 2020. Despite the shocks of the worldwide pandemic, the Ivorian economy steadily recovered in 2021 expanding at a rate of 7 per cent, much higher than the rate of 6.2 per cent in 2019. Nonetheless, inflation averaged 4.2 per cent — the highest in ten years, compared to 0.8 per cent in 2019 and 2.4 per cent in 2020, caused mainly by rising food costs. Due to the crisis in Ukraine, Côte d’Ivoire’s economy might see slower growth in 2022 and heightened inflation. A rise in exports, investment, and solid local consumption fuelled this robust recovery. If global circumstances continue to stabilise, GDP growth might reach 6.5 per cent in 2022 and 6.4 per cent in 2023. In addition to maintaining the current transformation agenda, exploiting newly found oil and gas reserves will boost economic activities.
Côte d’Ivoire’s shielded by pre-pandemic fundamentals
In early 2021, following the re-election of President Alassane Dramane Ouattara, the government was able to maintain political stability, keep jihadism out of the nation, and produce robust economic development. Macroeconomic reforms have received top priority during President Ouattara’s government, partly because he applies his experience as a former IMF official in policy decisions. Consequently, over the last decade, macroeconomic performance has significantly improved. Côte d’Ivoire was seen as one of the economies that would fare the best under the conditions when COVID-19 struck the continent.
Côte d’Ivoire’s economic resilience was a result of domestic reforms in public administration and critical economic sectors, significant public investment in rural infrastructure, education, and health care, as well as favourable contextual factors like the effects of the sizeable cancellation of external debt in 2021 and initially favourable global prices for cash crops.
When the first domestic cases of the COVID-19 pandemic were reported, the executive moved quickly to deploy containment measures and launch its crisis management capabilities. The commercial sector and religious leaders equally provided support to the administration. The government also took advantage of its healthy relations with the international community to establish financial assistance programs for vulnerable populations, the healthcare industry, and economic response plans for the corporate sector. Due to the robust pre-crisis foundations, significant economic diversity, and early easing of fiscal policy, Côte d’Ivoire displayed remarkable resilience to the pandemic. The government enacted an emergency expenditure plan to combat the health crisis and mitigate the economic slowdown. The economy rebounded quickly in 2021, although consolidation of governmental finances was delayed owing to increasing security costs. The budget deficit of Côte d’Ivoire was maintained at 5.6 per cent of GDP in 2021. Authorities anticipate a deficit of 4.6 per cent of GDP in 2022. The budget for 2022 is 15 per cent more than its predecessor and is the greatest among West African Economic and Monetary Union (WAEMU) member states. The return to the 3 per cent WAEMU norm is planned for 2024.
Sectors driving Côte d’Ivoire’s economy
Agriculture supports more than half of Côte d’Ivoire’s labour. The sector employs 40 per cent of the labour force, providing 21.4 per cent of the nation’s GDP. Locally cultivated subsistence crops provide the majority of rural household requirements. The Ivorian government is establishing raw material processing facilities to maximise agricultural production. The primary export product is cocoa beans, farmed by more than a quarter of the population. After surpassing Ghana’s cocoa bean exports in the late 1980s, Côte d’Ivoire became the world’s biggest producer. In addition, Côte d’Ivoire is a significant palm oil exporter. The palm oil sector has an export value of $38.42 million and a volume of 32.19 million metric tons in 2021. Côte d’Ivoire is also one of the major coffee producers in Africa. According to the United States Department of Agriculture (USDA), the nation will export 800,000 60kg bags in 2022/23.coffee.
Côte d’Ivoire is also one of the top three exporters and producers of cashew nuts globally. The country produces up to 850,000 kilograms annually. The government launched a five-year (2018-2023), $169.23 million plan supported by the World Bank to increase the profitability of the cashew industry. In recent years, rubber production has significantly expanded. Côte d’Ivoire ranks as the fourth largest rubber producer globally. In 2020, the country produced nearly one million tons of natural rubber, representing 8 of Africa’s latex. The West African nations’ rubber production has risen since 2005 when they produced only 170,000 tonnes.
The oil industry has gained strength in recent years due to a consistent growth rate and substantial expenditures. Côte d’Ivoire’s current output is modest, at around 30,000 barrels per day. International companies, including French giant Total and Britain’s Tullow Oil, have also announced significant discoveries of Ivorian offshore oil reserves in recent years.
The industrial sector
The industrial sector produces 20.9 per cent of the gross domestic product. The sector also employs 13 per cent of the active population. Food processing, textiles, building materials, fertilisers, tuna canning, and the assembly of motorcycles, automobiles, and bicycles are the country’s primary industrial sectors. Recently, the tertiary sector in Côte d’Ivoire has expanded at a pace comparable to that of many other African nations. Together with other industries, the telecommunications industry is a crucial driver of services. The services sector produces 42.1 per cent of the GDP and employs 47 per cent of the labour force.
Public debt, inflation and poverty
Public debt increased from 47.7 per cent of GDP in 2020 to 50.2 per cent in 2021. Experts predict the debt to reach 51.1 per cent in 2022 and 51.2 per cent in 2023. Issues related to supply chain inefficiency and energy constraints fuelled inflation. According to the national statistics bureau, inflation hit 4.2 per cent in December 2021. The IMF anticipates Côte d’Ivoire’s inflation rate to decline to 2.5 and 2.2 per cent in 2023, respectively. The new National Development Plan 2021-2025 focuses on public administration and modernisation, economic diversification, human capital, social inclusion, and infrastructure. According to the IMF, medium-term concerns include addressing urgent development needs, reducing debt vulnerability, and enhancing domestic income mobilisation. The low percentage of investment, the large part dedicated to the wage bill, the sluggish implementation of universal health coverage, and enhancements in the quality of healthcare and education as Côte d’Ivoire’s most significant challenges.
Despite strong economic growth in Côte d’Ivoire during the last three decades, the poverty rate has increased dramatically. More than 45 per cent of the population lives below the poverty line. Almost one-fourth of the labour force remains unemployed. In 2020, the World Bank estimated that the unemployment rate stood at 3.5 per cent. According to the UNDP, due to the COVID-19 pandemic, most families are officially unemployed. Moreover, a sizable proportion work part-time. Nonetheless, economic growth in Côte d’Ivoire remains on a favourable trajectory. The economy needs bolstering to expedite the structural change of its economy as envisioned by the new 2030 plan. To achieve this, the nation needs to raise its investments to new sectors with considerable potential for wealth generation and improvement in quality of life. These sectors would enable the inclusion and realisation of benefits for women and the most disadvantaged populations in society, especially those residing in the most isolated rural areas. Nonetheless, Côte d’Ivoire’s economic resilience has proven meaningful in a challenging global economic situation. Source: Furtherafrica.com