West Africa central bank holds rate, trims growth forecast

     The Central Bank of West African States (BCEAO) left its benchmark rate, the minimum cash rate for tenders, at 2.50 percent and lowered its 2017 growth forecast slightly while forecasting that inflation should 1.7 percent over the next two years, in line with its objective.
     The BCEAO’s monetary policy committee, which held its second meeting of the year at its headquarters in Dakar, took note of the consolidation of economic activity in the first quarter of this year with growth of 6.6 percent compared with growth of 6.5 percent in the previous quarter.
     For 2017 the central bank forecast growth of 6.9 percent in the eight-nation West African Economic and Monetary Union, slightly below 7.0 percent forecast in March.
      Last year the economy in union grew by 6.7 percent and 6.6 percent in 2015.
     The BCEAO is the central bank for the eight west african states of Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo. The economic union, which came into effect in 1994, is known as either WAEMU or by its French initials of UEMOA.
     Inflation in the union rose to 0.8 percent in the first quarter of this year, up from minus 0.3 percent in the fourth quarter of last year due to higher food prices, rising housing costs and transport tariffs in response to a rise in oil prices.
     Improving global economic activity helped raise the prices of the main commodities exported from the union, such as oil, rubber, cashew nuts, cotton and coffee. However, the price increase did not extend to cocoa, palm kernel oil and gold, the BCEAO said.
     The central bank estimated the union’s 2016 budget deficit of 4.4 percent of Gross Domestic Product, above the planned path of trimming the deficit to 3 percent of GDP by 2019.
      In February the International Monetary Fund said the medium-term growth outlook for the West African countries was favorable, but subject to significant downside risks.
      According to the IMF, these risks include global uncertainties, slippages in fiscal consolidation plans, sluggish structural reforms and a sustained decline in cocoa prices.
     ”Planned fiscal consolidation has been repeatedly deferred in recent years and most countries are still scaling up public investment,” the IMF said, adding these delays would lead to higher public debt while slow implementation of structural reforms would prevent the private sector from taking the lead in generating strong and inclusive growth.

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