World vanilla prices torpedo economic growth prospects

Bleak vanilla price forecasts on the world market are translating into equally bleak prospects for the impoverished Comoros, as the island nation is economically dependant on the commodity. In its latest country briefing the Economist Intelligence Unit (EIU) considered the official Comoran forecast of 2.8 percent real growth in GDP for 2005 "over-optimistic". According to the report, "low prices for vanilla are expected to have an adverse effect on overall real GDP growth - it seems increasingly likely that economic growth for 2005 will be closer to 1.3 percent, if not slightly lower." In a document published in mid-September 2005, the Central Bank of Comoros (BCC) attributed a 50 percent fall in the value of the country's exports to "poor international prices for vanilla, the country's main export crop". Vanilla prices dropped from over US $300 per kilogramme in 2003 to less than $50 in 2005. According to the United Nations Food and Agriculture Organisation, the commodity accounts for more than 50 percent of the island nation's exports. Price forecasts are not encouraging. "Now, supplies from India, Indonesia and Vietnam are coming onto the world market, pushing down international prices," the report noted, while "at the same time, major users of vanilla, such as food producers, are increasingly turning to lower-cost synthetic flavours, where supply is less likely to be affected by natural disasters". According to the EIU, some analysts suggest prices will remain depressed, and predict that global supply will exceed demand by up to 50 percent during the next few years. Political tensions over the upcoming elections and riots following a petrol price hike in September last year have also had a negative impact on economic activity, the report commented. Since gaining independence from France in 1975, the archipelago has endured a number of political and economic crises, including around 20 coups. Grande Comore, the main island in the group, recently experienced a volcanic eruption that left 120,000 people without drinking water.