This means that although developed and emerging economies may have similar debt-to-GDP ratios, they have vastly different interest debt burdens. This imbalance may lead to further sovereign defaults such as the one seen in Zambia in 2020. The increase in interest repayments will also take up more and more of government budgets, making it harder to spend money on COVID-19 responses.
The emergent East Africa-Eastern European economic corridor will be reliant on both rail and road connectivity. Over the last year, Egypt and Sudan signed a new transport agreement, which will formally create rail connections between both countries. The first rail link will be funded by Kuwait, further demonstrating the strong importance Sub-Saharan Africa holds for external actors.
The Trans-African Highway, spanning from Cape Town to Cairo, also serves the ambitious plan well. However, the ensuing conflict between Egypt and Ethiopia over the Grand Ethiopian Renaissance Dam (which will severely reduce Egyptian access to freshwater from the Nile), coupled with the ethnic-driven insurgency in Ethiopia’s Tigray province, pose significant perils to Trans-African Highway users.
Despite the above issues, there is cause for optimism because Africa has been affected less than other regions by the pandemic. Low interest rates in Western economies could encourage institutional investors to chase higher yields on the continent. The African Continental Free Trade Area (AfCFTA) may also be a conduit to accelerated development provided that infrastructure projects maintain access to finance.
The size of China’s GDP is likely to grow by about US$2.3 trillion next year and beyond, equaling the size of the entire African market. This growth could help drive commodity price increases and provide a huge lift to the African continent.
Côte d’Ivoire’s rapid economic growth and ambitious infrastructure program should continue to generate investor interest, but the risk of terrorism and political violence is intensifying. In October 2020, the current president was elected to a third term in a controversial election that saw dozens killed during violent political conflicts and the arrest of some political opponents. Despite a largely investor-friendly approach, political intervention and corruption are persistent issues for businesses in Côte d’Ivoire.
COVID-19 has affected the Ivorian economy less than others in the region, though the economic downturn may increase the potential for social unrest. The country’s response to the pandemic relies on its military and police, which are frequently occupied combating the terrorism threat, including deployments in neighboring Mali and Burkina Faso. As a result, terrorists such as al-Qaeda in the Islamic Maghreb (AQIM), ISIS, and other insurgent groups are conducting attacks inside Côte d’Ivoire, with military and infrastructure targets at high risk. Reflecting this reality, terrorism had Côte d’Ivoire’s largest WRR rating increase, reaching 5.9 in January 2021, up 25% from January 2020.
The country’s stable credit rating balances strong economic growth prospects and relatively low fiscal deficits and debt ratios against enduring political risks, low development indicators, and high commodity dependence. Côte d’Ivoire’s largest traded commodity is cocoa, which accounts for 40% of its exports. Overall, while political tensions and terrorism pose a significant risk, Côte d’Ivoire’s economic growth should remain robust if it continues to invest in counterterrorism initiatives.