Economic studies
Cameroon

Cameroon

Population 26.5 million
GDP 1,505 US$
C
Country risk assessment
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Synthesis

major macro economic indicators

  2019 2020 2021 (e) 2022 (f)
GDP growth (%) 3.9 0.7 3.4 4.0
Inflation (yearly average, %) 2.5 2.4 2.3 2.5
Budget balance (% GDP) -3.3 -3.6 -3.0 -2.1
Current account balance (% GDP) -4.3 -5.5 -3.7 -3.9
Public debt (% GDP) 42.3 45.8 46.0 45.1

(e): Estimate (f): Forecast

STRENGTHS

  • Relatively diversified resources, including forestry, agriculture (e.g. cocoa and bananas), oil and mining (e.g. aluminium)
  • Hydroelectric potential
  • Diversified economy, compared to those of other oil-exporting countries
  • Efforts to upgrade infrastructure are underway
  • Member of the Central African Economic and Monetary Community (CEMAC) and the Economic Community of Central African States (ECCAS), which implies that the CFA-Franc is pegged to the Euro, although the pooled reserves of the Bank of Central African States are limited

WEAKNESSES

  • External and public accounts dependent on commodities
  • Low government revenues: 13% of GDP in 2020
  • Weak but small banking system
  • Non-inclusive growth (severe poverty affects 24.6 % of the population in 2018, latest data), business environment remains difficult with poor governance (corruption, etc.).
  • Inadequate infrastructure, especially electrical infrastructure
  • Debt connected to the SONARA refinery, which is was damaged by a fire and is unable to produce refined products, which have to be imported for now
  • Heightened political risk: insecurity in the far north of the country and tensions in the English-speaking northwest and southwest regions
  • Succession of President Biya (89 years old, in office since 1982)

Risk assessment

Rocky recovery 

In 2022, Cameroon will still be in the middle of the COVID-19 pandemic, due to a weak pandemic management and a low acceptance of vaccination in the population. The pandemic should therefore have a restraining effect on private consumption (66% of GDP), which should remain below the trend-growth of the last years, as well as on investments (22% of GDP) in 2022, as more restrictive measures could be implemented. Security issues and outbreaks of violence should also hold back some investments. However, there are also some factors that should foster growth in 2022, like the African Cup of Nations, which should have promoted private consumption. The relatively low level of inflation and the stable currency are helping to keep the purchasing power in balance. Economic activity is also pushed by further construction work, e.g. on the Nachtigal dam and further work on the Kribi deep water seaport. The manufacturing and the agricultural sector (15% of GDP, 62% of employment) will also benefit from improved electricity supply thanks to the Lom Pangar-Bertoua transmission line, which connects the power plant of the Lom Pangar dam with 150 villages, from early 2022 onwards. Exports (19% of GDP) should benefit from higher demand for commodities (e.g. agriculture) and rising gas production, while oil exports should fall due to declining production because of underinvestment in the sector. However, extreme weather conditions and deteriorating security could reduce the increase in agricultural exports. Imports should grow with the slowly increasing consumption, but less than exports, which, in combination, will contribute to the economic growth.

 

Consolidation of public accounts likely to resume

Although the pandemic continues, the government is staying on the frugal budget path. This is the basis for a new three-year financing deal under the Extended Credit Facility of the IMF, approved in August 2021, with an envelope of USD 689.5 million. The first disbursement (USD 177 million) was already paid out in 2021. In addition, the World Bank has approved a USD 740 million envelope that is concentrating on agriculture projects and education for girls. Concomitantly, revenues should increase as the government proposed to eliminate several major tax exemptions and a better collaboration between customs and tax officials to maximize revenue. Furthermore, higher gas output should increase revenues via duties. With almost unchanged expenditures, this should reduce the public deficit and slowly alleviate public debt (domestic: 15% of GDP, external 30% of GDP). The main external creditors are the multilaterals and China. The usual trade deficit should slightly decrease in 2022 due to higher export revenues, while imports will decelerate with the near completion of infrastructures. Official budget support and concessional lending (often linked to projects), as well as foreign direct investments linked to infrastructure projects, will finance this and the small services and income deficits.

 

Ongoing violence poses a hurdle for economic recovery

Several outbreaks of violence are having a negative impact on the economic outlook. In the northern Sahel border region with Nigeria and Chad, jihadist attacks regularly take place (nine between May and October 2021, that took around 40 people lives) led by groups such as Boko Haram and the Islamic State West Africa Province. This situation could even worsen in 2022 as France decided to wind down its counter-terrorism operation in Q1 2022 in that region. Moreover, the conflict between the central French-speaking authorities and the English-speaking southwest and northwest regions will continue. The English-speaking community is fighting for an independent state, Ambazonia, since 2017. Furthermore, the pressure on natural resources is starting conflicts, including inter-communal violence, like in the summer of 2021 when fights over diminishing water resources between Lousgoum fishermen and Arab Choua cattle herders resulted in dozens of fatalities, the burning of 40 villages and thousands of people on the run. President Paul Biya, aged 89 (in February 2022), has held his office for 40 years and dominates the central government. His high age could result in a fast downturn of his health. By now, a credible successor is not positioned, so there is a high risk of a political vacuum. Biya’s party, the Rassemblement Démocratique du peuple camerounais, won 139 of the 167 seats in the March 2020 legislative elections. However, due to a high level of fraud and corruption, the political frustration in Cameroon is strong.

 

Last updated: February 2022

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