Chad Economic Outlook
Real GDP grew by an estimated 2.8% in 2018, after contracting 3.8% in 2017, supported by the Glencore debt renegotiation in February 2018 and substantial external financing. The fiscal balance was an estimated surplus of 0.1% of GDP, up from a deficit of 0.8% in 2017, thanks to increased revenue (mainly from oil), budget support, and control of total expenditure, particularly salaries (down 6%). The second review of the International Monetary Fund’s (IMF) Extended Credit Facility was approved in July 2018.
Monetary policy is part of the Central African Economic and Monetary Community (CEMAC) stabilization policy. Inflation rose to an estimated 2.1% in 2018, from –0.9% in 2017. The current account deficit improved to an estimated 4.3% of GDP in 2018 from 6.6% in 2017, in conjunction with the improved trade balance (from 3.0% in 2017 to 8.4% in 2018) following the recovery in oil prices.
Tailwinds and headwinds
Real GDP growth is projected to pick up in 2019 (4.2%) and 2020 (5.8%), aided by the surge in oil prices and the renegotiation of the Glencore debt. The secondary sector, heavily affected by the crisis, is projected to recover (growing by 2.2%) in 2019, like the tertiary sector, which could grow by up to 1.2%.
Since 2017, the IMF has rolled out a financing program for Chad. With the approval of the first two reviews in 2018, the consolidation of the public and external accounts is expected to continue in 2019 and 2020. The budget balance is projected to record a surplus of 0.2% in 2019 and 0.5% in 2020, while the current account deficit is projected to be 4.3% in 2019 and 4.5% in 2020. Inflation is projected to settle at 2.3% in 2019 and 2020, in line with the CEMAC requirement.
Threats that could undermine these prospects include volatile oil prices, insecurity linked to Islamist groups disrupting cross-border trade, and the effects of climate change (particularly drought and locust infestation), which could affect the agricultural sector.
The economy depends heavily on oil, which accounted on average for 78% of total exports in 2016– 18 and 89% in 2018. Oil revenues averaged more than 65% of total nongrant revenues in the precrisis period (2009–14). So the economy needs diversification, which could pay off if the agricultural sector were to be developed.
Moreover, the country lacks an industrialization strategy (though a study aimed at formulating an industrialization policy was launched recently). The secondary sector accounts for less than 15% of GDP. The infrastructure deficit is very pronounced, with an index score of 7.239 out of 100 (resulting in a rank of 51 out of 54 countries) in 2018.
With a Human Development Index value of 0.396, Chad was ranked 186 out of 188 countries in 2016, indicating that the country is lagging significantly in this area. Declining oil prices, which have plunged the country into a fiscal crisis since 2015, have weakened some of the progress in social indicators.
Chad has considerable agricultural potential. In 2017 the sector accounted for almost 50% of GDP and employed 90% of the population. In 2018, the government adopted an agricultural policy in support of value chain development. A large landlocked country, Chad has made regional integration a pillar of its development strategy. It is making a major contribution to the development of regional integration infrastructure, including electricity interconnection, preservation of the Chad Basin, a fiber optic backbone project, and the Algeria–Niger– Nigeria–Chad trans-Saharan road.