Cote d’Ivoire’s current account deficit is expected to widen from an estimated 3.3 per cent of GDP in 2020 to 3.5 per cent in 2021, reflecting robust growth in imports and relatively low recovery in exports, Fitch Solutions asserts.

Based on data from the Union Economique et Monétaire Ouest Africaine (UEMOA), of which Côte d’Ivoire is the largest economy, exports of cocoa grew by just 0.2 per cent in Q1 2021. Meanwhile, cocoa accounts for the bulk (52.8%) of Ivorian goods exports, and Côte d’Ivoire produces almost all of UEMOA’s cocoa output.

“The widening deficit reflects strong growth in imports outpacing that of exports, and widening deficits on the services and income accounts.”
Fitch Solutions

Fitch Solutions believes that cocoa exports likely strengthened in Q2 2021 and Q3 2021 on the back of healthy global demand. As such, the pace of growth over 2021 will be tampered by lower cocoa, expected to fall by 1.5 per cent to an average of US$2, 413/tonne in 2021.

However, Côte d’Ivoire’s other agricultural exports, comprising roughly a third of the total, will see a strong recovery, Fitch Solutions indicates. This will lead to total merchandise exports growing by 3.5 per cent to US$12.3billion in 2021.

According to Fitch Solutions, the domestic economic recovery will result in robust demand for merchandise imports, including fuels and consumer and capital goods. Based on Q1 data from UEMOA, imports of energy products rose by 13.4 per cent year-on-year. Following these are capital equipment (2.3%) and intermediate goods (2.1%).

Furthermore, the value of Ivorian imports will remain elevated in the coming months, resulting in import growth of 16.0 per cent to US$10.5 billion in 2021. Also, deficits on the services and income accounts are likely to widen too, Fitch Solutions predicts.

Current account deficit to widen in the medium-term

Meanwhile, growth in services exports will remain subdued as Côte d’Ivoire’s low vaccination rate hinders the recovery in inbound tourist and business visitors. Based on these considerations, services deficit is forecast to widen from US$2.2 billion to US$2.8 billion.

Accordingly, primary income account is likely to widen by 7.0 per cent to US$2.2 billion as payments for servicing of external debts continues to rise. Along these lines, secondary income deficit will also widen by 4.0 per cent to US$0.7 billion.

Fitch Solutions expects the current account deficit to widen slightly to 3.6 per cent of GDP in 2022, then narrow to an average of 3.1 per cent in 2023-2025. That said, export growth will remain moderate in 2022, owing to low cocoa prices, and modest growth in cocoa production.

“Despite widening current account deficits in the near term, we do not expect Côte d’Ivoire to face any external financing challenges in the coming quarters…”
Fitch Solutions

Accordingly, risks to the medium-term outlook are fairly balanced. On one hand, the emergence of Covid-19 variants resistant to existing vaccines could undermine the global economic recovery. And this could undermine demand for cocoa. On the other hand, the recent discovery of offshore hydrocarbon resources by Eni, poses upside risks to the medium-term outlook.

“The current account shortfall will widen further in 2022, and thereafter narrow as rising cocoa prices provide tailwinds to exports in the medium term.”
Fitch Solutions