Nov. 2, 2010 -
PRLog -- In this quarterly Business Forecast Report, we examine the evidence for and the ramifications of a much more pessimistic political scenario than our core view. While we still believe that the momentum is moving in favour of having an election within the year, we worry that the leadership of the country is actually intent on delaying elections and maintaining the status quo for significantly longer. Besides maintaining a climate of political uncertainty, without elections, we believe the economy is unlikely to make any sizable recovery in terms of growth, and that exports will also be lower than we currently forecast. This report also looks to the prospects of the CFA franc's peg to the euro, which, in our view, is in no danger of breaking over the next five years, though over the longer term the outlook is not so clear. Politically, we have long noted how the status quo benefits most of Côte d'Ivoire's leadership. With international leverage apparently relatively weak, we have become increasingly concerned that the authorities plan to prolong this period of transition, possibly for years. If this is the case, we would expect demands for disarmament as a precondition to elections to be the primary warning signal, though we can also envision other possible delay tactics, such as the tarnishing of the reputations of key peace agreement negotiators. Warning signs of this scenario would include ineffective opposition protests as elections are delayed past 2010 and government interference in the electoral register review process. We believe the failure to hold elections soon would substantially weaken both investment and export growth, leading to economic stagnation in per capita terms in a best case scenario, and economic regression in the worst. A temporary boost could probably be achieved in the form of a devaluation of the CFA franc, but we believe this is highly unlikely for several reasons: growth across west Africa is stronger than it was in the period preceding the 1994 devaluation, commodity prices are high and the euro is weak. Without devaluation, we still see strong export growth following political reunification, especially as the north of the country rebounds from the declines suffered in division. With respect to the business environment, new challenges are potentially being posed by climate change - which stands to reduce crop yields and exacerbate coastal erosion over the long run - and also by the proliferation of illegal checkpoints, which act as an unofficial tax on transport. That said, the financial sector is at least offering opportunities, albeit the constraints imposed by the government's bad record. The west African regional bourse has seen a new public and private bond issuance, as well as an initial offering by Bank of Africa Ivory Coast.
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