December 18, 2015 / 9:06 PM / 3 years ago

Fitch Upgrades Cote d'Ivoire to 'B+'; Outlook Stable

(The following statement was released by the rating agency) LONDON, December 18 (Fitch) Fitch Ratings has upgraded Cote d'Ivoire's Long-term foreign and local currency IDRs to 'B+' from 'B'. The Outlooks are Stable. The issue ratings on Cote d'Ivoire's senior unsecured foreign currency bonds have also been upgraded to 'B+'. from 'B' The Country Ceiling has been affirmed at 'BBB-' and the Short-term foreign currency IDR at 'B'. KEY RATING DRIVERS The upgrade of Cote d'Ivoire's IDRs reflects the following key rating drivers and their relative weights: HIGH Political and security risks have receded following the October 2015 presidential elections, when President Ouattara was re-elected in the first round with more than 80% of the votes The main opposition party, the FPI, participated in the poll after a four-year boycott and all stakeholders accepted the outcome of the election. Fitch estimates that the risks of major security incidents affecting macro performance or state's ability to honour its commitments have therefore receded. Reflecting the gradual normalisation of political life in the country, the World Bank's indicators of governance have improved since 2012, progressively converging towards 'B' rated medians. MEDIUM Fitch forecasts real GDP growth at more than 8% over the forecast horizon, above 2015 'B' median of 4.6%. This reflects the diversified agricultural base and prospects in the extractive sector, but also rising public investment to expand and renovate infrastructure in the country. Both domestic and foreign private investment, currently low at less than 10% of GDP, are expected to benefit from Cote d'Ivoire's status of a regional hub and from reforms in the business environment implemented since 2012. Fitch expects macroeconomic volatility to remain lower than 'B' rated peers, largely as a reflection of Cote d'Ivoire's membership of the CFA franc zone, which has ensured stability of the currency and the inflation rate. Traditionally a rating weakness, public finance management is gradually improving. Domestic arrears at suppliers and state-owned companies have materially declined and are expected to be fully repaid by year-end, while transparency on the procurement process and state-owned companies has improved. Government revenues are rising and will likely exceed 20% of GDP in 2015, although tax revenues remain weak. Fitch expects the budget deficit will moderately increase to 3.6% of GDP in 2015 and remain above 3% over the forecast horizon (in line with 2015 'B' median of 3.8%), reflecting the large wage bill and growing public investment. Cote d'Ivoire's 'B+' also reflects the following key rating drivers: Despite significant improvement over the past four years, development indicators such as GDP per capita and human development index remain weak compared to peers and entrench the rating in the 'B' rating category. Although rising, financial inclusion remains weak. The history of recent defaults on external commercial debt also continues to constrain the rating. Public debt is expected to moderately increase to 41.3% by end-2015 and broadly stabilise thereafter on back of strong nominal GDP growth and moderate deficits. Including bilateral debt owed to France under the Contrat de Desendettement et de Developpement (whereby funds repaid by Cote d'Ivoire are returned in the form of grants), public debt is expected to reach 47.4% of GDP in 2015, still below the 'B' rated median of 50.4%. The share of foreign currency debt, at 55% at June 2015, is lower than peers. The cost of debt is currently slightly below 'B' rated medians, but is expected to increase as the government increasingly resorts to the regional and international markets to finance its budget deficits. External risks are limited. Cote d'Ivoire has managed to contain its current account deficit, expected at 1.2% of GDP in 2015, below 'B' rated peers thanks to a diversified export base that ensures a structural trade surplus. This momentum is expected to continue over our forecast horizon, despite rising capital goods import needs, thanks to high cocoa prices and net imports of oil. However, the dependency on cocoa exports (accounting for a third of total current account receipts) and agricultural commodities remains a structural weakness of external finances. Fitch estimates the country is a net external creditor and rising FDI will moderate external debt accumulation over the forecast horizon. Pooling of FX reserves at the regional central bank and France's guarantee of the convertibility of the CFA franc support the credibility of the peg and reduce balance of payments crisis risk. RATING SENSITIVITIES The Stable Outlook reflects Fitch's assessment that the upside and downside risks to the rating are broadly balanced. The main factors that, individually or collectively, could trigger negative rating action are: - Renewed political instability or security incidents jeopardising macroeconomic prospects or the state's ability to honour its commitments. - A material decline in growth prospects. - A sharp deterioration in public debt dynamics. The main factors that, individually or collectively, could trigger positive rating action are: - Over the medium term, a gradual improvement in development and governance indicators, indicating better debt tolerance. - A significant improvement in public debt dynamics beyond our current projections. KEY ASSUMPTIONS Fitch assumes that global GDP growth will moderately pick up to 2.7% in 2016 and 2017, therefore supporting demand for Cote d'Ivoire's main exports, such as cocoa, rubber, gold and coffee. Fitch assumes the monetary arrangement with France will continue to support macroeconomic stability and the fixed parity of the CFA Franc with the euro will remain unchanged. Contact: Primary Analyst Amelie Roux Director +33 144 299 282 Fitch France SAS 60 rue de Monceau 75008 Paris Secondary Analyst Jan Friederich Senior Director +352 2263 9910 Committee Chairperson Andrew Colquhoun Senior Director +352 2263 9938 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Cote d'Ivoire - Rating Action Report here Applicable Criteria Country Ceilings (pub. 20 Aug 2015) here Sovereign Rating Criteria (pub. 12 Aug 2014) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=997095 Solicitation Status here Endorsement Policy here ail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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