Outlook for 2011-12

• The Economist Intelligence Unit's core forecast is that the president, Paul Biya, will stand and win re-election in 2011, in view of his dominance of the political scene and the lack of credible opposition.
• Mr Biya's party, Rassemblement démocratique du peuple camerounais, is expected to consolidate further its overwhelming majority in parliament in the legislative election scheduled for 2012.
• Calls for the president to step down-from civil society, the diaspora and the international community-will intensify ahead of the presidential election.
• Although the government will struggle to control spending during a presidential election year, we forecast that the fiscal deficit will steadily return to near-balance by 2012.
• Investment and increased mining output will raise real GDP growth to 3% in 2011 and further, to 4.3%, in 2012.
• Driven by trends in the trade account, the current-account deficit is forecast to widen to 4.3% of GDP in 2011 before stretching further in 2012, to 4.4% of GDP, as commodity prices reverse their gains.

Monthly review

• Only months ahead of the presidential election, the National Assembly passed two laws to modify the electoral process.
• In response to pressure from the UN and opposition parties, one of the revisions to the election process expands the membership of the national electoral commission, Elections Cameroon.
• However, the second election-related law has angered opposition parties because it gives the (yet to be created) Constitutional Council the exclusive right to announce the results of future elections.
• The US Department of State's latest human rights report, released in April, documented numerous abuses in Cameroon during 2010.
• Black market activity in the cotton sector flourishes, despite government policy and an export ban on the crop since 2005, as prices for cotton are reportedly three times higher in Nigeria than the regulated price in Cameroon.
• An umbrella civil society association, Dynamique Citoyenne, published an evaluation of the government's national development strategy, which found that implementation of the plan has been lagging.

After 28 years as president, Paul Biya remains the pivot around which the state apparatus in Cameroon turns, and the Economist Intelligence Unit expects him to remain in office beyond the end of his term in 2011. However, political and social stability is fragile, owing to the lack of a clear successor to the 78-year old president and the consequent jockeying for position within the ruling party, Rassemblement démocratique du peuple camerounais (RDPC). Rising insecurity, popular discontent and factionalism within the armed forces also pose serious risks. As the franc zone's major economy, the dangers caused to regional stability by a fracturing regime are clear, and civil society groups have called upon the international community to put pressure on the regime to consolidate democracy and clarify the rules for the transfer of power.

Mr Biya's age and reportedly fragile health mean there is a risk of him becoming incapacitated while in office. Revisions to the electoral laws in April state that if the presidency were to become vacant, then a presidential election would be hastily organised within 120 days. However, disagreements over who should assume the acting leadership of the country during the transition would result in a power struggle between the country's generals, military intelligence and the RDPC barons. Under the 1996 constitution the leader of the Senate should be named president; however, the Senate does not exist.

Elites within the RDPC have been jockeying for position since Mr Biya's re-election in 2004, which would have been the start of his final term of office had he not changed the constitution to allow himself to run again in 2011. While the RDPC officially remains united behind Mr Biya, there are signs of fierce competition within the party-between regions, age groups and ethnic alliances. Although the president's frequent cabinet reshuffles and his manipulation of the anti-corruption campaign, known as Opération épervier, have reinforced his influence over the party elites, they have also intensified competition between his underlings.

Corruption within the bloated ranks of government, together with reports of the president's frequent and costly foreign trips, will continue to fuel popular resentment towards an administration perceived to be self-serving and out of touch with the hardships faced by most Cameroonians. Living standards have improved little in the past ten years and citizens have few avenues for democratic expression, as opposition political parties have been largely marginalised and freedom of speech is curtailed. In light of this and a growing youth unemployment problem, a popular uprising of the type seen in Egypt and Tunisia cannot be ruled out (although it remains unlikely in Cameroon, as demonstrated by the weak popular response to the recent efforts by opposition parties and civil society groups to mobilise the population). The government has played up the expectations of economic and social development in the run-up to the presidential election. This could backfire if it fails to deliver, and particularly if the election process is considered to be rigged. To compensate for the regime's lack of popular legitimacy, Mr Biya has relied heavily on the security services to maintain his authority and suppress discontent. Recent reforms within the military appear to be an attempt to appease junior officers and prevent indiscipline and dissatisfaction in the armed forces from threatening the regime. As a result of the recent reforms and the president's long-standing hold on power, we assign a low probability to a successful military coup plot or a popular overthrow of the regime.

Despite rumours that Mr Biya will opt out of the presidential election to manage the political scene from the background, his candidacy for the October election is expected to be announced at the party congress in July, and little would prevent him from winning re-election for another seven-year mandate. The RDPC is then expected to add to its overwhelming majority in parliament in the 2012 legislative election. Through co-option and repression, the president has marginalised the opposition parties. The largest of them, the Social Democratic Front (SDF), which relies on its regional and anglophone support base, now holds only 16 parliamentary seats out of 180, compared with 43 in 1997. To highlight what it sees as irregularities in the election process, the SDF has filed several petitions in the courts to challenge the neutrality of the country's election commission, Elections Cameroon (Elecam). Recent changes to Elecam-which resulted from pressure from the SDF and the international community-amount to little more than cosmetic changes and the process will remain heavily skewed in favour of Mr Biya.

Although France will remain Cameroon's main foreign backer, the latter will seek closer ties with other countries that are interested in its natural resources, which include oil, timber, metals and diamonds. A recent high-level visit by Chinese officials reinforced the two nations' ties, and the Chinese government will continue to invest in Cameroon's infrastructure in exchange for mining deals. The US ambassador has also indicated that the US is interested in investing more in the country-perhaps as a challenge to China's presence in the region-and that it is concerned about rising maritime insecurity in the Gulf of Guinea.

Economic policy over the forecast period-and beyond-will be guided by a medium-term development policy, published in January 2010 as Document de stratégie pour la croissance et l'emploi (DSCE). The key objectives of the DSCE are to accelerate economic growth, create employment and reduce poverty. To achieve these goals the government plans to increase infrastructure investment, improve access to finance for the private sector and foster human development through higher spending on health and education. However, the limited absorptive capacity of the various ministries, due in part to inefficiencies in public financial management systems, will cause actual investment expenditure to fall short of budgeted capital spending. Moreover, despite the administration's modest efforts to improve it, the business environment will remain among the most difficult in the world, owing to bureaucratic bottlenecks, corruption, poor infrastructure, lack of access to credit and an inefficient court system.

Overall expenditure in 2011 is almost identical to the 2010 budget, producing a slight reduction in real terms. However, the government will struggle to contain recurrent expenditure in advance of the presidential election scheduled for late 2011. The government has already offered electricity and food subsidies, as well as a massive recruitment drive in the civil service to placate unemployed youth. However, a portion of new spending commitments will be unpaid in the current fiscal year as the government pays arrears from previous years and accumulates new unsettled payment obligations. After the presidential election is held, the government is expected to sign a new agreement with the IMF and to start tackling the budget deficit by reducing expenditure.

Despite falling production, oil revenue will increase in 2011 as prices remain strong, although oil revenue will stagnate in 2012-despite increased production and the depreciation of the CFA franc against the dollar-as the oil price falls by nearly 16%. Non-oil revenue, although behind target, is forecast to continue to rise on the back of increased investment in sectors such as telecommunications, timber, mining, gas and construction. However, budgeted increases in the tax base from the informal sector are unlikely to be strictly enforced in the run-up to the presidential election, which will lead to heavier taxation of larger businesses. In view of these trends, we forecast that the fiscal deficit will narrow to 1.7% of GDP in 2011 and to near-balance in 2012. The deficit will be largely financed through domestic borrowing.

Monetary policy is determined by the regional central bank, Banque des Etats de l'Afrique centrale (BEAC), which prioritises the control of inflation and the maintenance of the CFA franc's peg to the euro. Concerns about the fiscal sustainability and coherence of the euro area are set to persist in 2011 and the European Central Bank (ECB) is expected to maintain low-albeit rising-interest rates over the forecast period. The BEAC rarely makes changes to the policy rate, as it has only a small effect on liquidity levels given the lack of depth in regional financial markets. However, we expect the BEAC to follow changes in the ECB (with a lag) and, therefore, to increase its main policy rate, taux des appels d'offres, by 50 basis points over the course of 2011 and again in 2012.

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Following estimated real GDP growth of 2.8% in 2010, the economy is forecast to improve over the outlook period and to grow by 3% in 2011 and by 4.3% in 2012. Growth in 2011 will be supported by government consumption (despite official claims to the contrary), investment and mining, although oil production will decline further, to 57,500 barrels/day (b/d). Oil production is expected to recover in 2012, to 64,100 b/d, as new wells start production, which will drive exports and stronger growth. Investment in mining increased substantially in 2010, and several mines will begin production towards the end of the forecast period, further supporting growth in 2012 and beyond.

The important timber subsector will remain buoyant, and a successful policy to stimulate local first-stage wood processing will contribute modestly to job creation in the sector. Mining and infrastructure projects will drive construction, while other services such as banking, insurance and telecommunications will be supported by foreign investment. Camair, the revived national airline, started operations in March 2011 and will contribute to growth in the services sector. Agricultural production will increase in 2012 as various development projects begin to show effects, despite falling international prices for agricultural exports and structural impediments in the sector, such as a lack of land rights and poor access to agricultural credit.

Owing to Cameroon's heavy dependence on imported food and fuel, consumer price inflation is affected greatly by movements in global prices for those commodities. World oil prices will increase by 27% and food and beverages by 29% in 2011 before falling back in 2012. Moreover, investment and spending will generate domestic inflationary pressure, despite attempts by the government to control prices through ceilings. We forecast average inflation rising to 3.4% in 2011 before falling back slightly, to 3%, in 2012.

The CFA franc is likely to remain pegged to the euro at a rate of CFAfr655.96:EUR1 during the forecast period, and will therefore fluctuate against the US dollar in line with the exchange rate between the dollar and the euro. As a result of interest rate differentials we now forecast a slight appreciation of the euro relative to the dollar in 2011, and then a return to the trend of euro depreciation owing to continuing concerns about the euro area debt crisis. As a result, we forecast that the CFA franc will strengthen to an average of CFAfr480.6:US$1 in 2011 and then depreciate to CFAfr506.5:US$1 in 2012.

World prices for oil are expected to increase in 2011 before falling back in 2012. Inversely, Cameroon's oil production will continue to fall in 2011 before new production comes on stream in 2012. Overall, goods exports are expected to increase by 14.8% in 2011, boosted by global prices. Export growth in US-dollar terms will fall slightly in 2012, as new oil production is offset by falling prices. Increasing public capital investment and private inflows in the energy and mining sectors will stimulate import volumes, and as a result the trade balance will remain in deficit over the forecast period.

As international trade increases, the services deficit will increase to 2.2% of GDP in 2011-12 to pay for the transportation of goods. The income deficit will also creep up over the forecast period, to an average of 1.6% of GDP, in line with profit repatriation. Inflows of donor funds and a small increase in remittances will help to maintain the surplus on the current transfers account at an equivalent of 1.9% of GDP on average in 2011-12. Driven by trends in the trade account, the current-account deficit is forecast to widen to 4.3% of GDP in 2011 before stretching further to 4.4% of GDP in 2012.

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In late March, only months ahead of the presidential election, the National Assembly passed two laws to modify the electoral process: one law expands the board of the country's national electoral commission, Elections Cameroon (Elecam), from 12 members to 18, while the other grants the Constitutional Council the exclusive right to publish election results. The first law was the result of pressure from the opposition and the UN to broaden the representation of civil society and opposition parties in Elecam (March 2011, The political scene), which until now has been governed exclusively by former members of the ruling party and the neutrality of which has thus been questioned. Although the new members have not yet been appointed-at this point it is unclear whether the entire board will be reconstituted, or whether only six new members will be appointed-the stated objective of the new legislation was to allow greater integration of the country's socio-political views. The main opposition party, the Social Democratic Front, which had threatened to boycott the presidential election unless the constitution of Elecam was amended (November 2010, The political scene), claimed the new law as a victory and appears ready to contest the election.

However, not all of the opposition is celebrating. Hilaire Kamga, a human rights activist who authored a book in early 2010 calling for political change in Cameroon (L'offre Orange pour l'alternance), claims that the amendments are a sham concession designed to facilitate fraud and silence the opposition. The second law has removed Elecam's fundamental power to announce election results. Instead, the Constitutional Council-which has not yet been created, despite being referenced in the 1996 constitution-has been granted the exclusive right to announce the results of elections. This is apparently an attempt to avoid the kind of divisive scenario that occurred recently in Côte d'Ivoire, where the country's electoral commission and constitutional commission announced conflicting results. In the absence of the Constitutional Council in Cameroon, the Supreme Court will announce the results. According to Mr Kamga, as well as other opposition figures, such as the presidential candidate Edith Kah Walla, the judiciary's lack of independence raises concerns about the impartiality of election results and all but negates any influence of the expanded Elecam board.

The new laws also assert governmental influence over the election process directly by introducing procedural changes related to local voting commissions that come on top of similar amendments in March 2010, which likewise boosted the regime's influence over the vote (May 2010, The political scene). The new changes are subtle and partly semantic. For example, Local voting commissions that are in charge of registration and voting lists will also now have to work "in relation" to political parties, rather than "in collaboration". The presidents of these local voting commissions were given sole power to sign off on official minutes from meetings, thereby controlling information and evidence of fraud, according to Mr Kamga. Elections in Cameroon are governed by numerous and sometimes conflicting laws and the opposition has campaigned for the passing of a single electoral code. This and other reforms demanded by the opposition-such as the introduction of biometric technology, a run-off vote for presidential elections and the overhaul of voter lists-are unlikely to be met.

The US Department of State's latest human rights report, released in April, documented numerous abuses in Cameroon during 2010: unlawful deprivation of life, torture and ill-treatment, arbitrary detention, human-trafficking and discrimination against minorities. Notably, the report said that there was a dramatic increase in attacks on journalists and that several media outlets continue to practice self-censorship. Reflecting the lack of press freedom, a number of journalists have been detained in recent months following small protests against the regime in February (April 2011, The political scene), and the limited space for the expression of discontent will continue to favour the regime in the run-up to the presidential elections. Moreover, in April the Cameroonian authorities suspended, at the last minute, the holding of a human rights film festival in the capital, Yaoundé.

On March 17th local authorities in Far North Cameroon, the country's main cotton-growing region, seized almost 50 tonnes of cotton that was illegally bound, on the back of a fleet of motorcycles, for Nigeria, where the crop is sold at roughly three-times the price. Cotton prices in Cameroon are regulated by the country's only cotton processing company, the government-controlled Société de développement du coton (Sodecoton). The company is 59% owned by the state, 30% by the French-based Développement des Agro-industries du Sud and 11% by Société Mobilière d'Investissement du Cameroun, a Cameroonian holding company managed by a consortium of senior politicians from the north of the country. Sodecoton has exclusive rights to process cotton seeds commercially and, since 2005, when exports of cotton were banned, producers have had to sell their entire yield to the company.

Sodecoton has kept producer prices stable between CFAfr150 (31 US cents) and CFAfr200 since 1995. The regulated price acted as an incentive for farmers to cultivate cotton while the international price remained relatively stable and in line with other cash crops. However, since 2005 the price of other cash crops has risen faster than cotton, while fertiliser prices increased substantially and farmers have been prevented from selling their cotton abroad. While the CFA franc value of cotton increased by 250% on the international market between the first quarter of 2009 and the first quarter of 2011, the regulated price in Cameroon increased by less than 30%. As a result, many farmers have started to cultivate other crops or have shifted into the black market. Cameroon's official cotton production-which is dominated by low-yield small-scale farming-has decreased by almost 60% since its peak in 2004.

Cotton remains Cameroon's fifth-largest export earner, but cotton receipts fell from more than 4% of total exports in 2005 to slightly above 2% in 2009. In stark contrast to the prevailing trend, the government's ten-year economic strategy, Document de stratégie pour la croissance et l'emploi (DSCE), published in 2009, envisages cotton production increasing to 400,000 tonnes in 2015-a 170% increase from estimated production in 2010. Meanwhile, the government's efforts to increase production appear self-defeating. In an effort to halt the decline in official production, the government has instructed regional governors to enforce the export ban on cotton and started to subsidise fertiliser for cotton producers in 2010. The government provided CFAfr6.8bn (US$14m) in 2010- the first such subsidy since 1974, according to local media-and is expected to provide CFAfr8.5bn in subsidies in 2011. However, some farmers are using loans from Sodecoton, and possibly even fertiliser subsidies, to cultivate other crops. The experience of the cotton sector is illustrative of the issues facing the agricultural sector in Cameroon. The government's reliance on subsidies, price ceilings and export bans will continue to encourage black market activities and do little to stabilise (let alone increase) cotton production in the medium term. Although the World Bank, the IMF and some members of the government advocate for the privatisation of the sector to increase productivity, fears of political and social costs related to free-market competition have so far prevented it.

A civil society group, Association citoyenne de défense des intérêts collectifs (ACDIC), is organising a march on May 13th to protest against recent agricultural policy measures which it says do not benefit small-scale farmers-the vast majority of Cameroon's agricultural producers. The president of ACDIC, Bernard Njonga, says that most farmers will not improve productivity as a result of the new tractor plant that is currently being built in Ebolowa, South Region (August 2010, Economic policy), nor will farmers have access to credit offered by a planned agricultural bank (December 2010, Economic perform-ance). Moreover, he criticised the creation of a new body to purchase and distribute food-dubbed Mission de régulation des approvisionnements des produits de grande consommation (March 2011, Economic policy)-for having commercial objectives rather than boosting production and safeguarding the livelihood of farmers. According to Mr Njonga, there are 4.2m small-scale farmers and they are being ignored by the government's agricultural policy. Local media reports suggest that ACDIC has received more than 600,000 signatures for its petitions. Although agricultural policy appears recently to have focussed on stabilising prices for urban consumers, ACDIC hopes that a well-attended march in advance of the presidential election may attract the regime's attention to the plight of small-holders.

One year after the start of the DSCE, an umbrella civil society association representing more than 25 groups, Dynamique Citoyenne, published an evaluation of its implementation. The DSCE's primary goals between 2010 and 2020 are to stimulate annual average economic growth of 5.5%, reduce poverty rates by more than 10% and reduce underemployment rates by more than 25%, particularly through large infrastructure and energy projects. The civil society evaluation monitored the implementation of 425 different actions that should have been realised by the end of 2010 for the successful completion of the document's objectives by 2020. The association found that for 39% of the indicators no progress had been made or no data were available, while only 5% of the objectives had been fully implemented. According to the report, many of the government's objectives are vague, while others—such as the completion of a gas terminal in Kribi by 2012—are unrealistic. Moreover, beyond weak implementation, the study criticised poor access to information and claimed that many ministries had not begun to reflect the DSCE objectives in their budgets or policies.

Nevertheless, the minister of planning, economy and regional development, Louis Paul Motaze, said that he was positive about achieving the objectives, although several challenges—such as increasing agricultural production and reducing the country’s dependency on imports—needed to be tackled. Unlike the World Bank, whose findings were published in an economic update in January, the Economist Intelligence Unit finds that the government's budgeted allocation for expenditure roughly matches the projected expenditure in the DSCE in percentage terms (actual allocation has been less, as the overall budget fell owing to revenue shortfalls). Despite the unsurprising overallocation for defence and security (and the questionably large allocation for the office of the presidency), the government has raised the allocation to the health sector, as well as to the rural sector and productive infrastructure. The 2011 budget even envisages a real decline in the allocation to the office of the presidency, although it is unclear whether this will be achieved in practice.

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The incongruence of the abysmal implementation record of DSCE projects on the one hand and the government's budgetary allocations on the other is a result of both poor execution and mismanagement. The government's expenditure controls are weak in practice, and this facilitates the corrupt practices that pervade the bureaucracy. However, the government's attempt to align expenditure patterns with those of its national development strategy should be seen as a positive development.

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Land area

475,442 sq km

Population

19.1m (IMF estimate for 2009)

Main towns

Population in '000 (2010; World Gazetteer estimates)

Douala: 2,132

Yaoundé (capital): 1,812

Garoua: 574

Bamenda: 546

Maroua: 437

Bafoussam: 383

Ngaoundéré: 314

Bertoua: 297

Loum: 249

Climate

There is a large variation from north to south; the north has seven or eight months of dry season, whereas the equatorial south has a similar period of rain

Weather in Yaoundé (altitude 770 metres)

Hottest months, January-March, 19-29°C; coolest month, August, 18-27°C; driest month, January, 23 mm average rainfall; wettest month, October, 295 mm average rainfall

Language

French and English are the official languages; around 200 local languages are also spoken

Measures

Metric system

Currency

CFA franc

Fiscal year

January 1st-December 31st (before 2003, July 1st-June 30th)

Time

1 hour ahead of GMT

Public holidays

Fixed: January 1st (New Year's Day); February 11th (Youth Day); May 1st (Labour Day); May 20th (National Day); August 15th (Assumption); December 25th (Christmas Day); Moveable: Eid al-Fitr; Eid al-Adha; Good Friday; Ascension

All Islamic holidays are observed in accordance with the lunar calendar; this may mean that the following dates are approximate: Mawlid al-Nabi (the birthday of the Prophet, February 15th 2011); Eid al-Fitr (end of Ramadan, August 30th); Eid al-Adha (Feast of the Sacrifice, November 6th); Islamic New Year (November 26th)

Official name

République du Cameroun

Form of state

Unitary republic

Legal system

Based on English common law and the Napoleonic Code

National legislature

National Assembly with 180 members; elected by universal suffrage; members sit three times a year, in March, June and November, and serve a term of five years

National elections

October 2004 (presidential) and July 2007 (legislative); next elections due in October 2011 (presidential) and July 2012 (legislative)

Head of state

President; elected by universal suffrage

National government

Consists of the prime minister and Council of Ministers; includes representatives of the RDPC, the UDC and the UNDP; the cabinet was last reshuffled in June 2009

Main political parties

Rassemblement démocratique du peuple camerounais (RDPC), 153 seats in the National Assembly; Social Democratic Front (SDF), 16 seats; Union démocratique du Cameroun (UDC), six seats; Union nationale pour la démocratie et le progrès (UNDP), four seats; and Mouvement progressiste (MP), one seat

President: Paul Biya

Prime minister: Philemon Yang

Deputy prime minister & minister of justice: Amadou Ali

Deputy prime minister & minister of agriculture & rural development: Jean Nkuete

Ministers of state

Post & telecommunications: Jean Pierre Biyiti Bi Essam

Presidency: Laurent Esso

Territorial administration & decentralisation: Marafa Hamidou Yaya

Urban development & housing: Clobert Tchatat

Key ministers

Communications: Issa Tchiroma Bakary

Defence: Edgar Alain Mebe Ngo'o

Economy, planning & regional development: Louis Paul Motaze

Energy & water: Michael Tomdjio Ngako

Environment: Pierre Hele

External relations: Henri Eyebe Ayissi

Finance: Lazare Essimi Menye

Health: André Mama Fouda

Higher education: Jacques Fame Ndongo

Industry, mining & technology: Ndanga Ndinga Badel

Livestock & fisheries: Aboubakary Sarki

Primary education: Youssouf née Adjidja Alim

Public works: Bernard Messengue Avom

Tourism: Baba Hamadou

Trade: Luc Magloire Mbarga Atangana

Transport: Maïgari Bello Bouba

Governor of Banque des Etats de l'Afrique centrale

Lucas Abaga Nchama