Country Profile Comoros

The Comoros is a small, insular and essentially agricultural economy, with a limited industrial sector. Exports are concentrated in light-weight vanilla cloves and ylang-ylang perfume essence, which are prone to world price volatility. There is need for a coherent strategy for development against the background of years of emigration of skilled labour, deterioration of infrastructure and high energy and transport costs.

Real GDP growth remained weak at around 2% in 2004, implying a further reduction in GDP per capita of 0,8%, mainly as a result of crop diseases and a decline in vanilla production and vanilla world prices. The increase in inflation to 4,5% was due primarily to higher prices for petroleum products and to buoyant domestic demand fuelled by a surge in private transfers from abroad. The deterioration of the trade deficit was linked to a collapse in vanilla prices to less than a quarter of their former levels and an increase in fuel import prices. The deficit led to a draw down in international reserves, which nonetheless remained at about 11 months of imports.
In the early period after independence, from 1977 to 1986, the economy benefited from high investment levels fuelled by foreign assistance, resulting in a relatively high real GDP growth rate. In the period from 1987 to 1996, average real GDP growth declined to 0,3% per year as investment levels fell and emigration led to a decline of the labour force and a significant loss of human capital. In the period between 1997 and 2000, average real GDP growth improved to 2,3% per year, due to the slowing down of labour emigration and the rise in international vanilla prices.
The authorities expected a moderate rebound in economic growth in 2005, reflecting a recovery in agricultural production and in tourism Yet, the principal medium-term challenge is to set the country on a path of sustainable growth and poverty reduction. The medium-term goal of accelerating real growth to 5% per year by 2008 requires increasing investment and boosting productivity.

The country is furthermore in need of efficiency improvements in agriculture, development strategies to promote new sources of growth, reduction of the role of the government in economy and improvement of the business climate, privatization of public enterprises and expansion of financial resources.
The competitiveness of the Comorian vanilla sector has deteriorated and the authorities should now aim to take advantage of the country's relatively high-quality vanilla, creating a niche market. Tourism is also considered as a potentially important source of higher economic growth. Tourism in the region has indeed generally increased in recent years, except in the Comoros where it has declined. Re-establishing air links, simplifying visa procedures and promoting the Comoros as a destination for specialized tourism could lead to a recovery in tourist arrivals and revive the hotel infrastructure. Positive effects are expected from the re-opening of a major hotel in Ngazidja and the opening of vacation complexes operated by village cooperatives.
Fishing potential in the Comoros is also significant as catch in the country's territorial waters significantly falls short of that in neighbouring countries. Fishing volume in the Comoreos is only 40% of the fishing volume in the Seychelles and only 15 and 4 percent respectively of the volumes of Guinea-Bissau and Senegal, countries with much smaller territorial waters. A recent fishing license agreement with the European Union is an important step in expanding the fisheries industry and thr fish processing and farming activities.
Major reforms are also needed in the financial sector. The underdeveloped and uncompetitive financial sector is at present a major constraint to economic growth. The Comoros' financial sector is highly concentrated with only one (foreign-owned) commercial bank. As a result , a large segment of the population is excluded from the financial market. The government, with the financial support of the International Fund for Agricultural Development and the French Development Agency, set up two micro finance networks which have expanded rapidly since 2002. These micro finance institutions contributed to a diversification of financial services and the development of small businesses.

Basic Economic and Financial Indicators

Sources.: Comorian authorities and International Monetary Fund