Fitch Solutions says it expects Côte d’Ivoire’s current account deficit to reduce over several years as cocoa prices improve, but it doesn’t expect an agreement with Ghana to work.
The ratings agency said the West African country’s current account deficit is ‘set to continue on a broad narrowing trend’ over the coming years on the back of a gradual uptrend in cocoa prices, after a dramatic fall in 2017.
However, Fitch Solutions said the country’s external accounts will remain vulnerable to shifts in global cocoa prices, as attempts by the country and its neighbour Ghana to influence global prices are “unlikely succeed.”
Fitch Solutions stressed that recent plans linked to the Abidjan Declaration which committed Côte d’Ivoire and neighbouring Ghana to cooperate more closely on cocoa production and purchasing “will have a limited impact on global prices.”
Reports also suggest that Côte d’Ivoire’s is already taking steps to coordinating cocoa marketing with Ghana. The two countries jointly produce around 60% of the worlds’ cocoa and hope that by harmonising the means by which they manage and sell their cocoa that they can influence capricious global prices.
“We doubt that these plans will succeed,” said Fitch Solutions, “due to several structural obstacles, notably a declining relative share of global cocoa production and weak state control over many cocoa producing areas of both nations.”
Côte d’Ivoire is the world’s largest supplier of cocoa and the crop provides most of the country’s export revenue – averaging 38.7% of total exports over the five years to 2017 – meaning that the fortunes of the cocoa sector frequently dictate the external account outlook.
After surprisingly good weather in 2018, the Ivorian cocoa crop looks set to decline far less than we had previously expected relative to the bumper harvests of 2017 while global cocoa prices, despite some weakness in mid-2018, remain in a broad uptrend.
Fitch Solution’s agribusiness team expects that cocoa prices will remain between £1,725/tonne and £1,775/tonne between 2018 and 2022 after having fallen to £1,570/tonne in 2017 due to a gradual reduction in global cocoa surpluses.