For contextOctober 31st 2016PrintShareEuropean Investment Bank...

For context

October 31st 2016PrintShare
European Investment Bank opens regional bureau
Event

The European Investment Bank (EIB) has opened a permanent representative office in Yaoundé, the capital of Cameroon.

Analysis

This is the fifth office in Sub-Saharan Africa for the EIB—the EU's long-term lending institution—and its first permanent presence in Central Africa. The bureau will serve as a hub for the EIB's investment projects across eight countries in the region: Cameroon, Congo (Brazzaville), Gabon, Equatorial Guinea, the Central African Republic, the Democratic Republic of Congo, São Tomé and Príncipe, and Chad. The EIB reportedly invested some €850m (US$936m) in Sub‑Saharan Africa in 2015, but Francophone Central Africa is one of the regions where the bank's presence is lightest.

Greater engagement from multilateral lending agencies such as the EIB will be a boon for the region, as many governments are struggling to cope with lower fiscal receipts as a result of the global commodity price slump and a related slowdown in economic growth since mid‑2014. Although average global oil prices are likely to see a partial recovery from 2017, they will remain well below their 2011‑14 peaks in the medium term, maintaining pressure on the region's public finances. Continued inflows of foreign lending and investment will be critical to support key infrastructure projects and the local private sectors.

The opening of a hub in Yaoundé should help to promote crossborder projects with the potential to improve economic linkages within the region. Many countries in Central Africa face similar obstacles of weak transport and telecoms infrastructure networks, low levels of private-sector development and a heavy reliance (albeit to varying degrees) on volatile revenue from commodity exports. EIB officials have said that the Yaoundé office will co‑ordinate projects in several strategic areas, including crossborder trade and transport infrastructure, water supply and energy. A stronger EIB presence should also support efforts to expand the domestic private sector—including by providing new sources of financing via local banks and microfinance institutions—although the difficult business environment will remain a major obstacle for the development of small businesses.

Impact on the forecast

The creation of a dedicated Central African bureau of the EIB will help to support relatively steady inflows of foreign investment in the region. However, as global commodity prices remain low by historical standards, we maintain our forecast of only modest real GDP growth in Central Africa in over our outlook period (2017‑21).