Economics

Study Notes

Ivory Coast - Growth and Development

Level:
A Level
Board:
AQA, Edexcel, OCR, IB

The Ivory Coast is experiencing a period of strong economic growth although doubts persist about how durable this will be. Rising government spending and private investment to help rebuild and expand the country's infrastructure support growth.

Agriculture in the Ivory Coast accounts for 25% of GDP (and within that cocoa production is worth 15% of GDP), two-thirds of employment and 40% of annual export revenue but the economy is diversifying as a way of promoting development. Cote d'Ivoire has underdeveloped commercial reserves of gold, nickel, iron ore, manganese and diamonds - the exploitation of these natural resources offers significant growth potential for the economy but also brings with it the risk of the natural resource curse that has afflicted many countries with a similar natural factor endowment.

Ivory Coast has a fixed exchange rate - it has CFA Franc zone membership (with a currency peg to the Euro guaranteed by the French Treasury) this contributes to a stable currency and very low inflation (expected at 1.2% on average for 2014).

The balance of payments current account deficit is moderate (2.2% of GDP in 2014) supported by a structural trade surplus. The main exports are cocoa and oil (each 30% of GDP) and export markets are diversified – with Ghana, the Netherlands and Nigeria accounting each for 8 to 9% of exports, followed by the US at 7%. External debt is at 35% of GDP, half of which consists of official bilateral loans. Foreign exchange reserves cover the value of 3.5 months of imports.

The fiscal (budget) deficit is moderate (2.2% of GDP) in spite of high public investment. The government issued in July a $750 m 10- year euro-bond with a yield of 5.6%.The Ivory Coast is one of several African countries to have taken the decision to enter the international bond markets via the sale of new government debt. Public debt is around 40% of GDP - this is considerably lower than the majority of advanced developed countries and has considerably declined since debt relief agreements were signed in 2011-12.

GDP per capita remains low and has been outpaced by the average for sub Saharan Africa and individual countries such as Ghana. But significant progress is being made in achieving better human development goals. Similarly, governance and Doing Business indicators (as compiled by the World Bank) are weak but improving. Compliance with the Extractive Industries Transparency Initiative reflects better governance in the commodity sector.

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