Continued efforts by CEMAC member states and regional institutions have helped avert an immediate crisis but the regional economic situation remains challenging.
Member states and regional institutions will need to fully implement their policy and reform commitments to restore the region’s external stability and achieve higher and inclusive growth.
On December 17, 2018, the IMF Executive Board concluded the annual discussions with the Central African Economic and Monetary Community (CEMAC) on Common Policies of Member Countries and Common Policies in Support of Member Countries Reform Programs.
CEMAC’s economic situation remains challenging. Economic growth in the region, which declined substantially after the oil price slump of 2014, remains sluggish and has not yet picked up as expected. Non-oil growth is projected to decline in 2018 to 1.0 percent (from 2.6 percent in 2017). A larger-than-expected rebound in oil GDP (+7.3 percent) would nevertheless contribute to an increase in overall growth, from 1.0 percent in 2017 to 2.2 percent in 2018. While increasing, inflation would remain low, at about 2 percent at end-year. The situation of the banking sector remains difficult, owing to large government arrears. Non-performing loans continued to rise to 17 percent at the end of September 2018, while several banks continue to fail to meet certain prudential ratios.
The Bank of Central African States’ (BEAC) net foreign assets were lower than expected at end-September and are expected to remain so until the end of the year, despite rising oil prices and the efforts of BEAC and the Central African Banking Commission (COBAC) to strengthen the enforcement of foreign exchange regulations. This largely owes to delays in the adoption of IMF-supported programs and of the disbursement of the related external budget support with Congo and Equatorial Guinea. At the same time, the budgetary efforts of countries with IMF-supported programs are broadly in line with expectations. For the region as a whole, the non-oil deficit at the end of 2018 should be in line with expectations, while the overall balance would exceed expectations on account of higher oil revenues.
The medium-term outlook continues to see a gradual improvement in the economic and financial situation. Reforms to improve the business environment and governance and strengthen the financial sector, along with a lower drag from fiscal adjustment and the repayment of government arrears would contribute to the gradual recovery of non-oil growth, to 4½ percent by 2021. The overall fiscal balance (excluding grants) would be close to balance from 2019 onward, reflecting a further reduction in the non-oil primary fiscal deficit. Public debt would decline significantly, from almost 50 percent of GDP at end-2018 to less than 44 percent of GDP by end-2020. A further decline in the current account deficit to around 1½ percent of GDP in 2018–20 (compared to 4 percent of GDP in 2017) would contribute to a gradual accumulation of reserves, with reserve coverage reaching almost 4 months of imports by 2020. This outlook is predicated on the full implementation of policy commitments by CEMAC member states and regional institutions and is subject to substantial downside risks, including: further delays in the approval of financial arrangements with the Republic of Congo and Equatorial Guinea; lower oil prices; and tighter global financial conditions.