POLL-Peace dividend beckons for Ivory Coast economy in 2012


Ivory Coast will reverse a sharp 2011 contraction in its conflict-hit economy next year as long as President Alassane Ouattara holds the fractious West African country together, a Reuters poll of analysts showed.

Output will shrink by 5.8 percent in 2011 after a lurch back into civil war for four months that claimed at least 3,000 lives and strangled the economy, but aid-boosted reconstruction will already start to kick in during the latter part of 2011 and take 2012 growth to 5.2 percent, according to medians of eight forecasts.
“In 2011 the effects of reconstruction will begin to be felt and oil exports should resume full-swing,” said France-based StrategiCo’s Lydie Boka of one of the main export earners in the West African sub-region’s once-dominant economy, Reuters reports.

Ivory Coast exports on average about 50,000 barrels per day (bpd), but in the last year or so that number fell to around 35,000 bpd, and exports stopped completely because of an embargo during the post-election crisis earlier this year.
“Growth prospects in 2012 are brighter — assuming there is peace,” added Boka, expecting a pick-up in activity in the key cocoa and cotton sectors to boost the livelihoods of some nine million people, close to half the population.

A four-month-long conflict was resolved in April with the arrest of former President Laurent Gbagbo, who had refused to acknowledge Ouattara as the UN-certified victor of a November presidential election.

The dispute triggered foreign trade sanctions that halted cocoa exports from the world’s top cocoa grower, yet the rapid release of stocks onto the global market since then has meant exports this year have already raced ahead of last season.
“Our relative optimism is premised on minimal damage to the cocoa sector and a large bounce in activity during the second half of 2011,” said Lisa Lewin of London-based Business Monitor International, who forecasts an overall contraction of 5.4 percent this year but strong growth of 7.7 percent in 2012.

Lewin forecast two surges in the headline inflation rate during 2011, the first brought about by the onset of fighting and the sanctions and the second by reconstruction efforts that will squeeze a full year of state spending into six months.

Analysts saw inflation averaging around five percent this year — modest for the region — as price pressures were kept in check by the euro peg of the CFA franc and the fact that money supply bottlenecks during the crisis stunted demand.

Inflation was forecast to halve to 2.5 percent next year as the reopening of transport routes allowed goods to circulate more freely.

Standard Bank’s Samir Gadio estimated that foreign partners have already committed around $1 billion of budgetary support for an ambitious reconstruction effort which Ouattara has vowed must deliver benefits to Ivorians by the end of the year.

Yet Ouattara’s government has cited stretched public finances for its default regarding the last two coupon payments of its $2.5 billion 2032 bond and has said it will not be able to service its external debt this year.

Gadio estimated this year’s financing gap could reach 5.4 percent of GDP and possibly as much as 7.2 percent if the official figure used for external debt servicing fully reflects interest payments due.

Yet assuming donor support will continue and even increase in 2012 — possible given the broad international support for efforts to maintain the peace — analysts forecast a median deficit of just 2.1 percent of GDP next year, even allowing for the social spending Ouattara has promised.