The strongest and most diversified economy in the Central African Economic and Monetary Community (CEMAC), Cameroon has long been resilient to shocks, but its economy is showing early signs of a slowdown. GDP growth has been steady since 2010, averaging 5.8% from 2013 to 2015 before falling to 4.7% in 2016.

Lagging oil and gas prices resulted in postponement of investment in exploration and production, which led to a decline in extractive activities. The recession in Nigeria, the widening crisis in CEMAC, and unrest in the country’s English-speaking regions hurt domestic and external demand. These headwinds lowered the growth rate to an estimated 3.4% in 2017. However, the outlook beyond remains positive, with growth projected at 4.1% in 2018 and 4.8% in 2019, spurred by higher exports to the European Union following an Economic Partnership Agreement (EPA) and increased energy supply due to new hydroelectric dams. Other tailwinds affecting growth include the development of forestry and agro-industrial value chains, as well as a reduction in imports in favor of local products.

Macroeconomic evolution

Cameroon has signed an economic and financial partnership agreement (the Extended Credit Facility) with the International Monetary Fund (IMF) that will stabilize the macroeconomic framework in the medium term by requiring a restrictive fiscal policy for 2017–19. Public investment is expected to drop from roughly 8% of GDP in 2016 to 6.7% in 2017 and 6.6% in 2019. Government revenues are projected to rise from 16.1% of GDP in 2016 to 17.7% in 2017 and 18.16% in 2019. The budget deficit dropped from 6.1% in 2016 to an estimated 3.6% in 2017 and is projected to remain below 3% in 2018–19. The debt ratio is below the CEMAC ceiling of 70% of GDP. However, the use of commercial loans to finance infrastructure projects caused public debt to spike to 34.1% of GDP in 2016, up from 15.6% in 2012; as a result, the risk of debt distress rose from moderate to high. Although the level of indebtedness remains viable, it needs to be managed with great care. The authorities should step up their efforts to expand the non-oil revenue base and better prioritize spending while preserving social spending. To maintain debt sustainability, new nonconcessional borrowing should be reserved for projects with a high social or growth impact, in industries and sectors with clear competitive potential. Additional measures to enhance public financial and debt management are needed to improve spending efficiency and control fiscal risks.

Tailwinds

The fiscal consolidation under the Extended Credit Facility with the IMF and the structural reform agreements with financial and technical partners, including the World Bank, will allow authorities to increase the effectiveness and efficiency of public investment through a better project maturity framework. Efforts will focus on collecting higher fiscal revenues to offset the decline in oil revenues and customs duties brought about by the EPA. By refining incentives policies and improving the business climate, the government seeks to diversify the economy and spur inclusive and job-generating growth. Membership in a monetary union helps Cameroon maintain low inflation rates. But  it limits its options for adjusting to negative shocks and ensuring external competitiveness. Still, Cameroon is one of the most resilient economies in Africa. It is strategically located and blessed with excellent human capital and enormous natural resources.

Headwinds

Regional security threats from Boko Haram and rebel groups in the Central African Republic make it necessary to maintain spending on security, defense, and humanitarian issues; such spending reduces the resources available for social expenditures. Despite the relative political.

Emmanuel Ngota