A global business analysis group says cocoa production in Cote d’Ivoire will fall by 12% in 2018 due to falling global commodity market prices.
Reduced production of the country’s major export commodity is expected to deprive its treasury of foreign currency, weaken the cocoa farming-dependent rural economy and stagnate overall national economic growth.
In its latest country outlook released on 12 January, Business Monitor International (BMI) said the drop in cocoa output will have serious implications for the Ivorian banking sector, such as slowing credit growth by reducing demand while increasing the level of non-performing farmer loans.
“As the agricultural sector is set to struggle in 2018 due to poor cocoa output, we expect that the rural economy will be weaker. As well as this, the largest part of Cote d’Ivoire’s manufacturing sector is linked to food processing, with the agricultural and food processing sectors taking up 7.6% of all credit in the country, meaning that the effects of poorer cocoa production will spread into the manufacturing sector.
“This will see credit growth cool somewhat in 2018, especially in rural areas where the agricultural and food processing sectors are concentrated. Moreover, as the majority of lending by the banking sector is concentrated in urban areas, the poor performance of the rural economy is likely to limit credit growth to the already well-banked cities, which reduces the potential for growth,” BMI said.
However, the analysis said that despite the current problems, the long-term outlook for Ivorian cocoa production was subdued, but stable.
In the long term, cocoa farming will recover on the back of a “slow and subdued” commodity price increase that should lead to a gradual recovery of the agricultural sector. The eventual recovery of cocoa prices is also expected to further bolster asset growth in the ailing banking sector.