Economic Analysis - Fiscally Expansive Policies Spurring Economic Resilience - MAR 2017

BMI View: Cameroon's programme of public investment will keep growth elevated in the coming quarters, with a number of key project s underway. Furthermore, production of natural gas from 2018 will offer tailwinds to the trade balance.

Growth in Cameroon will be robust in the next two years on the back of public investment and new production opportunities. Fixed capital formation will be a significant driver of growth due to the government's investment programme and the packed infrastructure project pipeline. Furthermore, with gas production coming online by Q118, the new source of export revenue will be a boon to the trade balance. We also expect that improving economic conditions will see consumer confidence rise, causing a rebound in private consumption. Overall, Cameroon's economy will grow by 5.6% and 6.5% in 2017 and 2018, up from an estimated 5.3% in 2016.

Public Policies Providing Brighter Prospects
Cameroon - Real GDP Growth And Components
e/f=BMI estimate/forecast. Source: BMI, Statistics Cameroon

Government-led Investment Programme Will Reap Rewards

Fixed capital formation driven by the public sector will be a key driver of growth in 2017 and 2018. Development of infrastructure as part of the 'Vision 2035' development programme, which includes large-scale investment in hydropower and transport, will see the government prioritise development expenditure. Two particular projects - the Katsina Ala hydropower project and the Nachtigal Falls plant - will provide USD1.0bn in investment each. The Kribi port development, which will cost USD850.0mn, has received backing from the Export-Import Bank of China and Bollore Group ( see 'Construction Growth Outlook Outperforms West Africa ' , September 9). Cameroon's well-established model for public-private partnerships will also help it secure more funding, speeding the progress of future projects along. Furthermore, the government have successfully secured funding from multilateral institutions and Chinese banks for development projects, with the World Bank pledging USD325.0mn for an electrification project in December, and Industrial and Commercial Bank of China pledging concessional loans for a number of electrification and hydropower projects. As such, we forecast fixed investment to grow by 7.0% in 2017, and 6.0% in 2018.

New Production Opportunities Will See Trade Balance Improve

Production of natural gas will bolster Cameroon's trade balance in the coming years. Our Oil & Gas team expect Cameroon to become a net exporter of gas by 2017, which will help further diversify the country's exports. A project by Perenco in Kribi will come online by Q118, and BMI analysts expect a final investment decision to be taken by NewAge on the Etinde fields shortly ( see ' FLNG Ousts Onshore Plant ' , July 18). Meanwhile, Societe Nationale des Hydrocarbures (SNH), the state oil company, reported a 19.4% increase in oil production for Q116, and oil production is forecasted to grow gradually until 2019. However, exports of cocoa, one of the country's major crops, have been weak in 2016, and in Q316 exports were down 33.0% on the previous year despite stronger production. This is largely due to producers hoarding their stocks in reaction to lower prices, but our Agribusiness team expect prices to stay low on a longer term trajectory, meaning that exports will likely grow again in 2017 as farmers begin to sell their stock. Overall, the picture for exports is relatively bright, and we expect them to grow by 4.9% and 2.9% in 2017 and 2018 respectively, up from a contraction of 2.7% in 2016.

Cameroon - Major Public Infrastructure Projects
Project Name Sector Value Size Unit Companies Timeframe End Status
Where blank = not available. Source: BMI Key Projects Database
Mbalam (Haut-Nyong Department) - Kribi (Ocean Department) Rail Line Rail 3500 510 km Sundance Resources[Operator]{Australia}, Government of Cameroon[Sponsor]{Cameroon} Feasibility studies/EIA underway
Nachtigal Falls Hydroelectric Plant, Mfoundi Department Power Plants & transmission grids 1300 420 MW Nachtigal Hydro Power Company[Operator]{Cameroon}, International Finance Corporation (IFC)[Sponsor](30){United States}, Government of Cameroon[Sponsor](30){Cameroon}, Rio Tinto[Operator]{United Kingdom}, Electricite de France (EDF)[Sponsor](40){France} 2021 Project finance closure
Sonara Expansion Project, Limbe, Fako Department Industrial Construction 1297 1400 '000 tonnes Societe National de Raffinage (SoNaRa)[Sponsor], Ministry of the Public Contracts of Cameroon[Sponsor]{Cameroon} 2017 Under construction
Yaounde Housing Project, Mfoundi Department Residential Construction 1180 10660 units Government of Cameroon[Sponsor]{Cameroon}, Ozturkler Holding[Construction]{Turkey} Contract Awarded
Katsina Ala River Hydro Power Project, Menchum Department Power Plants & transmission grids 1000 450 MW Cameroon Ministry for Water and Energy (MINEE)[Sponsor]{Cameroon}, Joule Africa[Construction]{United Kingdom}, Lahmeyer International[Feasibility]{Germany} 2018 Feasibility studies/EIA underway
Yaounde Tramway, Mfoundi Department Rail 1000 50 km Prefarail[Operator]{Belgium}, Government of Cameroon[Sponsor]{Cameroon} 2019 At planning stage
Platinum Power Hydropower Complex, Centre Region Power Plants & transmission grids 846 400 MW Platinum Power[Operator]{Morocco}, Government of Cameroon[Sponsor]{Cameroon} 2020 At planning stage
Sonara Phase - II Expansion Project (New Hydrocracker Complex), Limbe, Fako Department Industrial Construction 830 Ministry of the Public Contracts of Cameroon[Sponsor]{Cameroon}, Ustay[Construction](14){Cameroon}, Maire Tecnimont SpA[Construction](86){Italy}, Societe National de Raffinage (SoNaRa)[Sponsor] 2017 Contract Awarded

Household Spending To Edge Up

Improved consumer confidence on the back of positive developments in other areas of the economy will see private consumption grow at a quicker pace in the coming quarters. As projects progress, employment opportunities - particularly in construction - will be increased. Relatively low average inflation, which we forecast at 2.3% and 3.1% in 2017 and 2018, up from a low 1.4% in 2016, will keep real wage growth high. As a result, we are forecasting private consumption growth of 5.5% and 6.0% in 2017 and 2018, up from a projection of 5.0% in 2016.