May 31 2014

Natural resources are the source of major potential for the Comorian economy

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Comortech_Comoros_growth

  • Archived report on the economical progress of Comoros that Despite the ongoing debt crisis in the euro area, the Comorian economy grown up by an estimated 2.7% in 2012, up from 2.6% in 2011.
  • Given the lack of any significant growth in exports, domestic demand will continue to be the main driver of growth, which is forecast to reach 3.2% in 2013 and 3.8% in 2014, albeit with an expected deterioration of the current account deficit.
  • Natural resources are the source of major potential for the Comorian economy, but because there has been no structural change, the resources are not sufficiently exploited to make any real contribution to growth.

The economy of the Comoros grew by an estimated 2.7% in 2012, despite the ongoing euro area crisis. This growth was driven by strong agricultural exports, continued strong foreign direct investment (FDI) in the transport sector (roads and ports) and domestic demand, supported by remittances from emigrants. The expected recovery of public investment in economic and social infrastructure (energy, water, transport, health and education) after the Comoros reached the completion point of the Heavily Indebted Poor Countries (HIPC) Initiative should boost private investment, which is forecast to grow by 9% in 2013 and 2014.
If, however, the Central Bank of the Comoros (BCC) does not conduct a strict monetary policy to control prices, growth could generate inflation, since domestic demand is expected to remain steady thanks to remittances from emigrants and imports of capital goods for infrastructure rehabilitation.

For growth to continue, the business climate will need to improve significantly. In the World Bank report Doing Business 2013, the Comoros had the same rank as in 2012: 158th out of 185 countries. It did gain twelve places in the ranking for registering property and three places for business start-up,1 but it lost places in almost all other rankings. The climate could, however, begin to improve in 2014 thanks to technical assistance from the International Finance Corporation (IFC).

The stimulus policy focused on economic and social infrastructure and the improvement of human capital should boost employment among unskilled youths. However, a proactive policy to train the local workforce and thus boost employment is unlikely to be implemented before 2014.

Unlike the other Indian Ocean island economies (Mauritius and Seychelles), the Comorian economy has not yet truly begun a structural change. The Comoros is highly unstable politically, it suffers from insufficient budgetary resources and the authorities lack a long-term strategic vision on sustainable development and optimal management of natural resources. Consequently, the main resources that fuel its economy – land, biodiversity and marine resources – are deteriorating at an ever faster rate.

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