Country Summary

Macroeconomic performance: In 2018, real growth remained stable at an estimated 2.8%, close to the 2.7% in 2017. From the supply side, growth was driven mainly by improved access to elec- tricity, increased telecommunications activity, and dias- pora remittances. From the demand side, growth was driven by public investment and exports, which benefited from rising vanilla prices. The fiscal balance turned to an estimated deficit of 3.1% of GDP in 2018 from a surplus of 0.4% in 2017. With the Comorian franc’s peg to the euro and the goal of price stability, the country does not resort to monetizing the budget deficit. External debt, an esti- mated 26.5% of GDP in 2018, down from 30.1% in 2017, is considered sustainable. The currency peg promotes monetary stability through compliance with convergence norms. In 2018, inflation was an estimated 2.0%, up from 1.0% in 2017, a result of the decrease in fuel and com- munication prices, the latter due to the entry of a private telephone provider. The current account deficit was an estimated 6.0% of GDP in 2018, up from 4.3% of GDP in 2017. The trade balance has a feature of structural deficit and often is financed by large flows of remittances. The real exchange rate was almost stable between 2017 and 2018 but is generally considered to be overvalued. For- eign exchange reserves are comfortable, at 6.6 months of imports in 2018.

Tailwinds and headwinds: Real GDP growth is projected to reach 2.8% in 2019 and 2.9% in 2020, almost unchanged from 2018. But the economic outlook is expected to be more favorable due to a gradual improvement in the electricity sector (though it remains fragile) and to the government’s commitment to a major development program, with the gross investment rate expected to increase from 22.5% in 2017 to 25.1% in 2019. The country has defined its 2030 Emergence Plan and is implementing the road- map towards its 2030 goals. In January 2018, the gov- ernment promulgated a law to increase the share of renewable energy in its overall consumption to improve energy independence. There is also a favorable trend projected in trade, with levels of –0.6% in 2019 and 2.7% in 2020, from –3.8% in 2018.
But a turbulent political environment could affect economic activity. There are mixed opinions on the results of the constitutional referendum of July 2018, which suspended the rotating presidency of the three islands until 2030. The fiscal situation also remains fragile, with continued underexpenditure on equipment and weaknesses in medium-term budget planning. The continued high nonperforming loans limit credit to the private sector. Finally, Comoros continues to face weak institutional capacities, which hamper the effectiveness of macroeconomic and sector management; a lack of basic infrastructure (energy and roads), whose poor quality hinders economic transformation; vulnerability to external shocks and heavy dependence on external aid; the low overall competitiveness of the private sector; high unemployment, especially among young people; and the high exposure to threats related to the overex- ploitation of natural resources (deforestation, land deg- radation, groundwater pollution, and coastal erosion) and climate change.

Source: African Economic Outlook 2019

Fixed Income


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