Abstract
This 2007 Article IV Consultation highlights that a number of factors have constrained Cameroon’s growth potential relative to the group of lower-middle-income economies, including lower investment rate, shallower financial depth, less open trade; weaker infrastructure and human capital base; and weaker business environment. Growth picked up somewhat in 2006, following a rebound in construction activities, oil output, and forestry production. The outlook for 2007 and the medium term is encouraging. Economic activity is expected to pick up further in 2007, reflecting stronger performance in the forestry, construction and tertiary sectors.
This statement provides an update on recent economic developments based on information received after the staff report was issued. This information does not alter the thrust of the staff appraisal.
1. Inflation declined, reflecting the impact of lower fuel prices. Consumer price inflation fell to 1.4 percent in the first quarter of 2007 (compared with 4.5 percent in the same period last year).
2. Fiscal performance in the first quarter of 2007 was broadly satisfactory, though revenues and investment spending were lower than expected. Based on very preliminary data, the overall fiscal surplus was significantly higher than projected as lower-than-programmed spending more than compensated for lower revenues. The underperformance in nonoil revenues stems mostly from lower-than-projected nontax revenues reflecting delays in the payment of dividends. Performance on investment execution was mixed: while domestically-financed investment was close to the program target, foreign- and debt relief-financed investments were significantly lower than expected. The end-March 2007 quantitative benchmark on the nonoil primary balance,16 was missed by a small margin (0.03 percent of GDP). The authorities are taking steps, in line with program commitments, to strengthen nonoil revenue collection and monitor spending closely.
3. The authorities have relaunched the privatization process for the national airline. As a first step, they announced in May a bidding process for the recruitment of an international bank to advise the government during the privatization process.
4. The authorities are in the process of finalizing bilateral agreements on debt cancellation with Paris Club creditors. As of May 2007, eleven such agreements had been signed and three remain to be finalized. The Paris Club agreed to extend the deadline for signing bilateral agreements from December 31, 2006 to June 30, 2007.
Nonoil revenues (excluding grants) minus domestically-financed spending (excluding debt relief-financed investment and restructuring spending).