major macro economic indicators
|2017||2018||2019 (e)||2020 (f)|
|GDP growth (%)||5.8||6.7||6.7||4.0|
|Inflation (yearly average, %)||0.1||1.0||1.7||2.0|
|Budget balance * (% GDP)||-5.9||-4.0||-3.0||-2.5|
|Current account balance (% GDP)||-10.0||-8.3||-7.8||-7.1|
|Public debt (% GDP)||54.3||56.1||54.1||52.0|
(e): Estimate. (f): Forecast. (*): Including grants.
- High growth potential, low inflation
- Significant international financial support (ODA, HIPC, MDRI)
- Strategic position (access to the sea for hinterland countries)
- High poverty
- Narrow and volatile export base (dependent on cotton price fluctuations)
- Erratic electricity supply
- Governance gaps: corruption, rule of law, regulation
- Impact on activity and tax revenues of Nigeria's economic policy decisions
- Terrorist threat from neighbouring Nigeria and the Sahel
- Low bank profitability, low government revenues
The Revealing Benin programme is boosting growth
In 2020, growth is set to continue on its favourable trajectory, supported in particular by continued implementation of the Revealing Benin development plan, which foresees investments worth USD 15 billion over five years (2016/2021). Flagship projects such as the new international Glo-Djigbé airport and the extension of the port of Cotonou will continue to drive public investment. Private sector participation in investment is also set to be enhanced via the adoption of a PPP law (2017), reforms to improve the business environment, including the restructuring of the Investment and Export Promotion Agency, and the introduction of a new investment code (2018). Cotton production, which accounted for about 30% of exports in 2018, is expected to continue to increase in 2020, benefiting from reforms in the sector and efforts to improve yields. Higher agricultural yields should continue to boost export flows. However, these flows are likely to suffer from the partial closure of the border with Nigeria, with trade between the two countries accounting for 20% of GDP. Remittances from expatriate workers are expected to remain sluggish, with a significant downside risk connected with the weaker Nigerian economy. This situation may affect the strength of private consumption. That said, private consumption will be helped by low inflation, which should remain below the 3% threshold set by WAEMU despite a probable increase in the price of imported products.
Approaching compliance with WAEMU convergence criteria
In 2020, according to the approved budget, the budget deficit will amount to 1.8% of GDP, as the country continues efforts to reduce the deficit in order to meet the WAEMU deficit convergence criterion of 3% of GDP. However, we do not believe that the objective will be achieved. Fiscal consolidation efforts are set to continue in line with the authorities' commitments under the Extended Credit Facility provided by the IMF in April 2017. These efforts include further rationalisation of current expenditure to free up resources for capital investment expenditure. These will be accompanied by a program to improve the efficiency of public investment, which will continue to be rolled out in 2020. The scrapping of certain tax shelters and steps to modernise the tax administration should improve revenue collection. Fiscal consolidation should also help to curb the rapid run-up in public debt, particularly in the regional market, which has been used to finance public investment in recent years. For the first time, in March 2019, the State issued Eurobonds in an amount of €500 million at 5.76%, increasing the fully public external debt from 26.5% of GDP in 2018 to 31.9% in 2019.
The current account deficit is expected to keep narrowing in 2020, supported by a reduction in the goods and services deficit (10.6% of GDP in 2018), with exports continuing to grow thanks to the rapid increase in cotton production and strong Chinese demand. However, the balance is expected to continue to show a deficit, burdened by a large import bill due to demand for foreign capital goods and services. Transfers, both public and private (2.5% of GDP in 2018), will be nowhere near enough to offset this deficit, especially as they may shrink owing to the situation in Nigeria. Concessional government loans, FDI and grants will continue to finance most of the deficit.
Persistent political tensions
Following the legislative elections in April 2019, just two parties, the Progressive Union and the Republican Bloc, both of which had ties to the President, formed the Parliament. Because of controversial reforms to the electoral code, which tightened the requirements for standing as a candidate in the legislative and presidential elections, no opposition party was able to register in time. Opposition parties claimed that they were the victims of an administrative obstruction that had no other purpose than to eliminate them from the race. While the 83 newly elected deputies should support President Patrice Talon, the historically low voter turnout calls the legitimacy of this eighth legislature into question and reflects the collapse in the President's popularity. According to the National Autonomous Electoral Commission (CENA), only 23% of registered voters cast ballots, and most observers consider even this figure to be quite inflated. Severe post-election tensions have punctuated political and social life. Several people have died, and at one point the army surrounded the home of former President Thomas Boni Yayi (2006/2016), who is the current President's main opponent. In the end, Mr Boni Yayi was evacuated to France for health reasons, after mediation by several heads of state. Tensions are expected to persist in the lead-up to local elections in March 2020. President Talon has set up a political dialogue to address the unrest, but several opposition parties have not been invited to take part in the initiative.
In the regional context, Benin faces a very real terrorist risk, illustrated by the kidnapping of two French nationals in the north of the country by terrorist groups operating in the Sahel. They were found by the French army in northern Burkina a few days later.
Last update : Février 2020