major macro economic indicators
|2014||2015||2016 (f)||2017 (f)|
|GDP growth (%)||6,5||5,0||4,6||5,4|
|Inflation (yearly average) (%)||-1,0||0,3||0,6||2,2|
|Budget balance (% GDP)||-2,3||-7,5||-4,2||-4,3|
|Current account balance (% GDP)||-8,7||-10,5||-10,0||-11,8|
|Public debt (% GDP)||30,9||39,3||42,5||43,9|
(e) Estimate (f) Forecast
- One of the most stable democracies in Africa
- Significant financial support from donors (ODA, HIPC, MDRI)
- Strategic location (access to the sea for landlocked countries)
- Narrow and volatile export base (dependent on fluctuations in cotton price)
- Erratic electricity supply
- Governance shortcomings
- Impact on activity and tax revenues of Nigeria's economic policy decisions (33 times Benin's GDP)
- Terrorist threat (Boko Haram) from neighbouring Nigeria
Growth sustained by agricultural production
After the downturn observed in 2016, growth is expected to climb again in 2017. This should come from faster activity in Nigeria and a resumption in agricultural production linked to the end of the El Niño weather phenomenon. Cotton production, which dominates the large primary sector, is projected to rally accordingly, thanks to improved weather conditions and an expected rebound in prices. This activity is also expected to benefit from the diversification and modernisation policy implemented as part of the strategic recovery plan. Manufacturing industry is also expected to see growth in line with agricultural production and the start-up of new food processing plants. As for the tertiary sector, this should benefit from investment in the modernisation of the Cotonou port, stimulating port and commercial activities.
Public investment projects are likely to continue and encourage the involvement of the private sector thanks to public-private partnerships. The objective is to eradicate poverty, which, according to a household survey in 2015, has worsened since 2011 mainly through key projects in the areas of transport, energy, hydro-agricultural and tourism facilities and health. With the aim of making growth more inclusive, these programmes include an infrastructure element to end the isolation of the most remote regions, specifically by means of the completion of a railway line connecting Cotonou to Niamey.
While remaining moderate, inflation is projected to rise in 2017 in a context of higher domestic demand and higher prices for various import products (fuel, foodstuffs).
Large twin deficits
The government inherited a considerably weakened fiscal situation when it took office in April 2016, because of expensive off-budget projects undertaken by the previous administration in late 2015 - early 2016. The new government has begun discussions with the IMF on a possible three-year programme and succeeded in obtaining approval from the National Assembly in late June for an amended draft finance bill for 2016 (8% spending cut compared to the initial finance bill). It was also able to suspend the large majority of off-budget projects, as these had not yet been implemented. The budget deficit should, as a result, remain stable in 2017. Meanwhile, the government is preparing a medium-term investment plan and has initiated reforms to improve the business environment and the management of public finances.
The current account deficit will widen in 2017, under the impetus of a worsening trade balance. This is because imports will increase due to the rising oil bill and that for foodstuffs in conjunction with a still considerable volume of capital equipment imports. Higher remittances from expatriate workers and aid should lead to a surplus in the balance of transfers, limiting the impact of higher purchases of transport services. The current account deficit is mainly financed by concessional loans and by flows of FDIs associated with the activity of infrastructure-related public-private partnerships.
A new democratic changeover
Supported by the opposition, the businessman Patrice Talon won the presidential run-off election by a large majority (20 March 2016) against Lionel Zinsou, Prime Minister and candidate favoured by the outgoing president. This is the fourth democratic changeover in the country since 1991.
This victory took place against a background of rising popular dissatisfaction over the lack of social progress and a series of corruption scandals. In institutional terms, one of the key measures he would like to see adopted is the single presidential term. This would mean the Beninese soon being called again to the polls to vote for or against a constitutional amendment on this matter.
The business climate remains marked by corruption, patronage, red tape and a weak regulatory framework. Despite some progress on business start-ups, the World Bank's Doing Business report ranks the country 153rd out of 190 countries.
Last update : January 2016