Download Cameroon Business Forecast Report Q2 2011 Brochure

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Cameroon Business Forecast Report Q2 2011
Description:
Still Waters Run Deep While Cameroon may appear calm on the surface, long-simmering discontent could
suddenly boil over. Aware of this and following the national uprising in Egypt, the government has acted to
head off the biggest grievances before national elections later this year – nonetheless, we believe protests
surrounding this election now have the potential to be larger than before.
Dissatisfaction with the status quo is related to weak economic performance, with real GDP growth
projected to remain just below 3.0% this year before surging over the next two years on the back of megaprojects that will do little to improve the conditions of the wider populace. Government policy is expected to
at least help contain inflation, the spark of previous protests, through both direct interventions in the
markets for food and fuel and continued use of the euro-pegged CFA franc.
While it is important not to overstate similarities, Egypt and Cameroon share several worrying similarities:
long-serving rulers up for re-election in 2011, corrupt governments, huge youth populations with weak
economic prospects and almost no prospects for change through official democratic channels. We consider
the chances of national protests in Cameroon elevated in the current climate, though still remote. At a
minimum, protests against the national elections may be bigger this year than they otherwise would be, and
government responses to protests will probably be swifter. The continued spread of protests internationally,
or an opposition victory in Egypt, would further raise these risks.
Cameroon’s exchange rate and monetary policy are decided at the supranational, not domestic level, and
looking to the wider central African economy, we see little in the way of changes over 2011. The extreme
rarity of adjustments to the peg of the CFA franc to the euro has helped keep inflation and perceptions of
exchange rate risk low, and in the absence of macroeconomic tensions and the promising outlook for oil
prices, we see no adjustments to the peg over the next five years. Meanwhile, with inflation likely to remain
subdued, we believe the regional central bank will similarly refrain from adjusting its policy interest rate this
year, especially given the relatively weak outlook for growth.
The risk of a sudden shift in political stability following the retirement of President Paul Biya weighs on the
business environment, which also suffers from widespread corruption, an inflexible labour market and
questionable independence in the judiciary. The country’s growth strategy over the next several years hinges
on new investment in natural resource extraction, and to help accomplish this, significant investment in
infrastructure is planned. While we expect this to be largely successful, we are less optimistic about the
prospects for taking on more institutional problems afflicting the business environment.
Beyond the next five years, if tackling these weaknesses proves too difficult, we believe the temptation to reexamine the benefits of a devaluation may mount.
Contents:
EXECUTIVE SUMMARY
Still Waters Run Deep
CHAPTER 1: POLITICAL OUTLOOK
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
What Are The Risks Of An Egypt-Style Uprising?
At a minimum, the anti-government uprising in Egypt is likely to encourage the Cameroonian authorities to
head off sources of grievance ahead of October 2011 national elections
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
President’s Longevity A Key Vulnerability
Over the next 10 years, the single greatest uncertainty facing Cameroon is how a transition from the
leadership of
President Paul Biya, who has ruled since 1982, will be managed
CHAPTER 2: ECONOMIC OUTLOOK
SWOT Analysis
BMI Economic Risk Ratings
Growth Sluggish Until 2
We have maintained our real GDP growth forecasts for slow real GDP growth of 2.9% in 2011, followed by a
surge in 2 and 2013 as new oil fields begin production and investment projects commence
TABLE: ECONOMIC ACTIVITY
Monetary Policy
Programmes To Limit Inflation
On the back of government programmes to contain the prices of fuel and food, we see inflation averaging
just 2.8% y-o-y in 2011, up from a revised estimate of 1.6% y-o-y over 2010
TABLE: MONETARY POLICY
Regional Monetary Policy
CEMAC Monetary Policy: Rates On Hold In 2
We continue to see the Bank of Central African States holding interest rates throughout 2011, as low
regional inflation and sluggish growth continue
Regional Exchange Rate Policy
CFA Franc (Central): Steady As She Goes
Over the next five years we expect the peg of the CFA franc to the euro to serve the six members of CE MAC
well, and therefore see no adjustment to the peg
TABLE: EXCHANGE RATE
CHAPTER 3: 10-YEAR FORECAST
The Cameroonian Economy To 2020
Growth Trajectory To Improve Over Next Decade
Average growth in Cameroon over the next 10 years is forecast to outpace that seen over the previous
decade, on the back of growing investment in infrastructure and the non-oil economy, financed by a
combination of oil revenues, foreign direct investment and foreign assistance
TABLE: Long-Term Macroeconomic Forecasts
CHAPTER 4: BUSINESS ENVIRONMENT
SWOT Analysis
BMI Business Environment Risk Ratings
Institutions
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
TABLE: BMI LEGAL FRAME WORK RATING
Infrastructure
TABLE: LABOUR FORCE QUALITY
Market Orientation
TABLE: MI DDLE EAST & AFRICA, ANNUAL FDI INFLOWS
TABLE: LABOUR FORCE QUALITY
Operational Risk
Table: TOP EXPORT DESTINATIONS
CHAPTER 5: BMI GLOBAL ASSUMPTIONS
Global Outlook
Growth Solidifies, But Inflation Poses A Threat table: Global Assumptions
TABLE: GLOBAL & RE GIONA L REAL GDP GROWTH % CHG Y-O-Y
TABLE: CONSENSUS FORECASTS
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