Ivorian deficit to narrow on stronger cocoa exports in 2023

Côte d’Ivoire’s current account shortfall will shrink to 3.9 per cent of gross domestic product (GDP) in 2023, following an estimated record deficit of 5.5 per cent in 2022, according to rating firm Fitch Solutions.

The trade surplus will widen to 3.6 per cent of GDP in 2023 – from 2.6 per cent in 2022 – on stronger cocoa exports and softening import growth as global commodity prices moderate.

In 2024, we believe that the Ivorian current account deficit will shrink further to 3.3 per cent of GDP, driven by stronger hydrocarbon exports as the Baleine oil field comes online, as well as a rise in inbound tourism on the back of the Africa Cup of Nations.

At Fitch Solutions, we forecast that Côte d’Ivoire’s current account shortfall will shrink to 3.9 per cent of GDP in 2023, following an estimated record deficit of 5.5 per cent in 2022. 

While 2022 trade data for Côte d'Ivoire is not yet available, figures published by the Banque Centrale des États de l'Afrique de l'Ouest (BCEAO) show that regional cocoa exports fell by 1.2 per cent in US dollar terms over the year.

Meanwhile, regional imports increased by an unprecedented 21.0 per cent, driven by elevated global food and energy prices following Russia’s invasion of Ukraine.

Given that Côte d'Ivoire is the West African Economic and Monetary Union’s largest cocoa exporter and biggest economy, these statistics suggest that the Ivorian current account deficit widened significantly in 2022 from 3.9 per cent of GDP in 2021.

In 2023, we expect that exports will improve on a brighter outlook for the Ivorian cocoa sector. Our Agribusiness team projects Ivorian cocoa production to increase by 5.1 per cent in 2022/23 (the cocoa year runs from October to September), compared to a decline of 5.6 per cent in FY2021/2022.

Indeed, beneficial rains in Côte d’Ivoire’s cocoa producing regions in early 2023 point to a healthy mid-crop (April to September), providing tailwinds to export growth in 2023. 

Meanwhile, tight global cocoa supply on the back of lower production in Ghana (due to the impact of the cocoa swollen shoot virus and lack of fertilisers) and Nigeria (due to the demonetisation attempt that has disrupted often cash-based cocoa transactions) will keep cocoa prices elevated through 2023. 

­Indeed, our Agribusiness team projects global cocoa prices to average US$2,500/tonne, an 11.5 per cent increase on the US$2,243/tonne recorded in 2022, putting upside pressure on export receipts.

That said, previous under investment in Côte d’Ivoire’s hydrocarbons sector will keep crude output low, with our Oil & Gas team forecasting that oil production will fall by 3.1 per cent in 2023. 

Combined with moderating oil prices, this will cap export growth over the year. Taking these various dynamics into account, we project merchandise exports to increase by 12.0 per cent in 2023, well above the 10-year pre-pandemic average of 1.9 per cent.

Improving cocoa production to boost exports

Meanwhile, we expect import growth to soften as global food and energy prices moderate. Global commodity prices spiked in 2022 but will trend lower in 2023 amid weaker global demand prospects and a stronger supply outlook.

Indeed, our Oil & Gas team projects the price of Brent to fall from an average of USD99.0/bbl in 2022 to USD90.0/bbl in 2023, while our Agribusiness team forecasts wheat prices to decline by 18.8 per cent.

These dynamics will see import growth ease to 6.0 per cent in 2023, from an estimated 21.5 per cent in 2022. All told, stronger exports and moderating imports will see the Ivorian trade surplus widen to 3.6 per cent of GDP in 2023, from an estimated 2.6 per cent in 2022.

Energy costs to deflate import bill

While Côte d’Ivoire’s trade surplus will widen, its primary income account will remain firmly in deficit.

External borrowing increased significantly over recent years in order to finance the government’s 2015-2020 National Development Plan and pandemic-related support over 2020-2021.

Indeed, we project the external debt-to-GDP ratio to reach 42.9 per cent in 2023, from 25.3 per cent in 2015, which will increase interest payment outflows. 

Furthermore, a strong economic outlook (see chart below) and robust growth in the country’s infrastructure sector will support corporate performance, which will result in higher dividend pay-outs.

These factors inform our forecast that the primary income deficit will widen to 3.4 per cent of GDP in 2023, from an estimated 3.3 per cent in 2022.

Strong profit repatriation on robust economic growth in 2023 

In 2024, we believe that the Ivorian current account deficit will shrink further to 3.3 per cent of GDP. This will be driven by a stronger outlook for oil exports.

Indeed, our Oil & Gas team projects that the Baleine oil field – which was discovered in 2021 – will come online in early 2024, increasing hydrocarbons production by a projected 25.8 per cent. We believe that this will keep export growth robust at a projected 8.8 per cent in 2024. 

Meanwhile, we believe that import growth will lag behind – at a projected 7.0 per cent– as the conclusion of the Africa Cup of Nations (which will be hosted in Côte d’Ivoire in early 2024) will cap demand for imported capital goods.

Relatedly, an increase in inbound tourism due to Africa Cup of Nations will narrow the services deficit to 2.9 per cent of GDP, from a projected 3.2 per cent in 2022.

Despite its current account shortfall, we see limited risks to Côte d’Ivoire’s external position in 2023 and 2024.

The country’s foreign reserves are held at the regional BCEAO, with its reserves covering 4.6 months of imports in September 2022 (latest available data), above the IMF’s recommended level of at least 3.0 months.

In addition, the IMF announced on March 15 that it had concluded a staff mission to Côte d’Ivoire and that it expects to finalise a staff-level agreement “in the coming days”. 

Potential IMF assistance under the Extended Fund Facility or Extended Credit Facility would boost Ivorian reserves and provide an additional layer of protection to Côte d’Ivoire’s external position.