ABIDJAN, May 24 (Reuters) – A robust growth forecast for the West African Economic and Monetary Union will likely be dampened by new political turmoil in the region despite a post-war revival in Ivory Coast, a top International Monetary Fund official said on Thursday.
Ivory Coast, the dominant economy in the eight-country bloc, is emerging from a decade-long political crisis that led to economic stagnation in the world’s top cocoa producer. The crisis ended last year after a brief civil war that left some 3,000 dead and saw the economy shrink by 4.7 percent for 2011.
An economic turn-around fueled by billions of dollars in donor support and heavy investment in large public works projects is currently underway, however, and the IMF is forecasting 2012 growth at over 8 percent. That growth had been expected to buoy the outlook for the economic union as a whole.
“Given the strong growth in Ivory Coast, we expected growth to be somewhere around 6 percent or so, maybe even a touch higher…2012 was shaping up to be a very good year,” Roger Nord, deputy director of the Fund’s African department said in an interview.
“Unfortunately, the locomotive role that Ivory Coast can now start playing is at least partially offset by the renewed conflict in Mali and in Guinea Bissau,” he said.
Mutinous soldiers toppled the government in Mali on March 22, unintentionally paving the way for rebels to capture the country’s north. Efforts by regional neighbours to broker a deal to reinstate a civilian government in the capital, Bamako, have met with repeated setbacks.
The military took control in tiny, coup-plagued Guinea Bissau during an overnight putsch just weeks later. And while power was handed back to civilian authorities at the weekend, disagreements remain over how the post-coup transition should be handled.
The political instability is expected to have grave consequences for the economies of the two countries. And the unrest, particularly in Mali where growth was already seen as falling close to zero this year due to a prolonged drought, is likely to weaken the forecast for the economic bloc as a whole.
“I think we will probably have to reduce (the growth forecast) somewhat b ut not hugely because of Mali…Guinea Bissau is very small, so that is going to be negligible,” Nord said.
“Mali is more important. It is more than 10 percent of the GDP of the region, and so there is some possible impact there.”
Growth in the bloc, known by its French acronym UEMOA, fell from 4.6 percent in 2010 to just 1.3 percent last year largely as a result of the contraction in Ivory Coast created by the war there. So even with a slight downgrading of its forecast due to the duel crises, it is likely to experience relatively healthy growth in 2012.
The Ivorian economic turnaround that has helped fuel renewed optimism will likely get a further boost next month when a decision is expected on an IMF-backed debt relief deal. The plan calls for relief of $5 billion of the country’s debt, reducing its current stock of debt by 40 percent.
“They are fully on track…I think there is confidence that, indeed, debt relief will be granted as scheduled,” Nord said.
On top of the Ivorian recovery, UEMOA is also set to feel the benefits of a burgeoning oil sector in Niger and new leadership in its other main economy, Senegal.
“The ambitions, both here in Ivory Coast and also the new administration in Senegal, is to ramp up growth,” said Nord.
“Maybe that won’t be happening in 2012, but 2013 and 2014, with good policies in Cote Ivory Coast and Senegal, which account for the bulk of the regional economy, I think there is a strong possibility that we will see strong growth going forward.” (Reporting By Joe Bavier; Editing by Bate Felix, Ron Askew)