major macro economic indicators
|2017||2018||2019 (e)||2020 (f)|
|GDP growth (%)||-5.6||-2.4||3.0||2.5|
|Inflation (yearly average, %)||-0.9||4.0||3.0||3.0|
|Budget balance * (% GDP)||-0.9||1.9||0.0||2.3|
|Current account balance (% GDP)||-6.6||-3.4||-6.5||-5.9|
|Public debt (% GDP)||49.7||48.2||43.8||39.0|
(e): Estimate. (f): Forecast. *Including grants.
- New oil fields brought into production
- Development potential of the agricultural sector
- Very high poverty rate (40% of the population in 2019 according to the World Bank)
- Over-reliant on oil (about 25% of GDP and 75% of exports)
- Business climate not conducive to thriving private sector; high level of corruption
- Geographically isolated
- Worsening security conditions at both national and regional levels (role of Boko Haram)
- Worrying drying-up of Lake Chad, with negative effects on cotton, fishing and the environment
Growth is set to accelerate in 2020 thanks to the expected pick-up in oil production, which will stimulate investment and exports, despite weaker oil prices. As a result, oil GDP growth is expected to increase significantly. Meanwhile, the privatisation of CotonTchad (formerly a State-owned cotton company) could increase seed cotton production. This will significantly improve the agricultural sector’s contribution to the still low growth of (non-oil) GDP through private consumption (75% of the working population works in agriculture and 85% of the total population depends on it) and exports, which are expected to expand for a third year. Looking to take advantage of the upbeat economic conditions and the extra fiscal leeway gained in 2018 by rescheduling the debt owed to Glencore, the country has decided to maximise its potential by diversifying the economy through the Five-Year Development Plan (2017/2021) and investing in the creation of ten agri-food hubs with private sector involvement to develop agriculture and livestock. The plan also includes industrial free zone programmes to encourage the establishment of commercial and logistical supply activities.
Debt rescheduling and IMF financial assistance are helping to ease fiscal pressure
For the third year running, the budget balance will show a surplus in 2020, again providing debt relief, despite the very large defence budget (30% of the total budget). Oil revenues are expected to increase, benefiting from new extraction technologies and increased production, with the commissioning of new fields, such as the Daniela field, which is expected to boost production to 45.2 million barrels per year. These revenues, which until now have been 90% used to service the debt owed to Glencore (USD 1.36 billion representing 15% of the country's total debt), may be used to finance investment and reduce debt, notably thanks to the debt rescheduling obtained in early 2018. Reassured by the easing of fiscal pressure, the IMF decided to release disbursement of the next stage of funding under the ECF negotiated with the country in 2017. In return, the government was asked to continue fiscal consolidation reforms, including better management of the wage bill, which resulted in the sale of CotonTchad in April 2018.
The current account deficit is expected to decline slightly. The trade balance is structurally slightly positive thanks to oil, livestock and cotton exports, but will weaken due to several investment projects in the oil sector that should increase imports of capital goods. This surplus is largely offset by the deficit in the balance of services (particularly oil), which is close to 20% of GDP. The improvement in the current account should be supported by the continued high level of transfers (6% of GDP in 2018) by expatriates and the positive effect of the debt rescheduling with Glencore. A strong performance from FDI (4% of GDP) should ensure that financing is provided for this deficit. Foreign exchange reserves, while continuing to increase, will remain at average levels (about 4.2 months of imports).
The banking sector will remain highly vulnerable due to the close link between banks and the State, but also because of weakness in the non-oil sector. At 8.2% of GDP in 2018, credit remains low, while doubtful loans stand at 31.4%.
Parliamentary elections still uncertain
President Idriss Déby Itno, who came to power in December 1990, was re-elected in April 2016. In the run-up to the 2021 presidential elections, political tensions continue to crystallize around the question of the organization of parliamentary elections. Initially scheduled for 2015, these have been postponed several times. Despite a date set for 9 August 2020, the opposition parties continue to denounce the deadlock, believing that it will be difficult to organise the elections during the rainy season.
The social and security situation remains extremely fragile. In August 2019, clashes between farmers and herders killed at least 50 people in the east of the country, raising fears of inter-ethnic conflict. In the Lake Chad basin, the terrorist group Boko Haram remains very active, despite joint military operations with the Cameroonian, Nigerian and Nigerien armies. On the Libyan border in the northeast, the French air force stopped an incursion by a column of armed rebels based in Libya (Union des forces de la résistance). These attacks have caused internal population movements, in addition to inflows of migrants from surrounding conflict-struck countries, including Sudan and the Central African Republic. The country has therefore decided to step up in the fight against terrorism by participating in the G5 Sahel force and by making insecurity a central theme of its presidency of the Central Africa Economic and Monetary Community (CEMAC) from 2017 to 2022.
Despite the establishment of a Presidential Council for the Business Climate led by the President himself, the social and security situation, shortcomings in electricity, the internet and telecommunications, and the use of private contracts in the award of public contracts, among other factors, are having a significant impact on the business environment, with the country ranking 181st out of 190 in the Doing Business 2018 index.
Last update : February 2020