Togo

MAJOR MACRO ECONOMIC INDICATORS

(e): Estimate (f): Forecast

RISK ASSESSMENT

Following on with the economic recovery in West Africa

Togolese growth will continue at a comfortable level in 2023 and 2024, mainly driven by household consumption (73% of GDP). However, the latter will remain dependent on the agricultural sector (accounting for 18% of GDP and two-thirds of jobs), and in particular on the revival of the cotton industry in 2024 after three consecutive seasons of weaker production, mainly due to adverse weather conditions. Moreover, the expected El Niño-related climatic disorders are likely to have a negative impact on the yields of the country's main crops. The durably high price of fertilisers despite the subsidies introduced in 2022 will also hinder the sector's recovery. Nevertheless, the sector will benefit from public investment aimed at supporting the private sector in the local processing of agricultural products. In addition, the government will continue to invest in the health and defence sectors through the construction of health and military infrastructures. Services will benefit from the robustness of the country’s port activity, which will nevertheless be penalised by the sanctions applied to Burkina Faso and Mali, which traditionally use Togolese port infrastructures, but with which relations have become strained. The government plans to modernise the port of Lomé's facilities and increase its annual cargo handling capacity, which will boost the country's exports. Despite Ghana's sluggish performance, exports have been boosted by China's elimination of 98% of customs duties on imports from Togo and eight other African countries, effective from 1 September 2022. However, business forecasts are subject to developments in the inflationary situation. After a rise in the general price level in 2022 on back of the inflationary consequences of the war in Ukraine, pressure is gradually easing thanks to the tightening of monetary and fiscal policies, coupled with falling food and oil prices. Following in the footsteps of the European Central Bank, the Banque Centrale des Etats d'Afrique de l'Ouest (BCEAO) could, after a final tightening at the end of 2023, halt the series of hikes on its key rate which began in June 2022 in order to contain inflation in the countries belonging to the West African Economic and Monetary Union (UEMOA).

Slight improvement in the twin deficits

Togo's fiscal situation deteriorated sharply in 2022 as a result of the government's measures to support households and businesses in response to rising inflation. Higher fuel subsidies, tax exemptions and increases in public wages and retirement pensions all contributed to the widening deficit. At the same time, the government had to release emergency funds (2% of GDP) to deal with growing insecurity in the Savanes region in the north of the country, the scene of jihadist incursions. The situation will improve in 2023 and 2024 as inflationary pressures ease, allowing for a gradual reduction in subsidies, and as the government continues its reforms in public finance management. The government will also seek to optimise revenues by continuing its fight against fraud and evasion, and by broadening the tax base. Nevertheless, customs exemptions on imports of materials and equipment aimed at promoting local processing will continue to weigh on government revenues, as will social spending. Togo's external accounts also worsened in 2022, with the value of imports exceeding that of exports against a backdrop of high global food and energy prices. The decline in the current account deficit which began in 2023 should continue in 2024, driven by the reduction in the trade deficit on back of increasing agri-food and textile exports. However, the surplus on the balance of services will shrink with the slowdown in port re-export activity. Last, the secondary income surplus is set to increase slightly, in line with workers' remittances. The deficit will be financed mainly by regional borrowing. Togo remains exposed to a risk of debt distress deemed moderate by the IMF. Nevertheless, the weight of its public debt-to-GDP ratio, which is mainly domestic and regional (60%, but accounts for 83% of total servicing), will increase slightly in 2023 and 2024. Multilateral creditors account for 60% of external debt, and commercial creditors for 37%.

Between political stability and security problems

The current President, Faure Gnassingbé, became president of Togo in 2005 following in the footsteps of his family which has ruled the country since 1967. He was re-elected in 2020 for a fourth five-year term following elections marred by accusations of fraud. The ruling Presidential party, Union pour la République (UNIR), currently holds 59 of the 91 seats in the National Assembly and is expected to retain its majority in the Parliamentary elections due to be held in Togo on 20 April 2024. The opposition's weakness is essentially due to good economic results (excluding the Covid period) and the government's firm stance. Nevertheless, the absence of an electoral timetable two months ahead of the elections worried the opposition, while the Independent National Electoral Commission (CENI), responsible for organising the elections, is made up mainly of members supporting the regime. On the security front, Togo declared a state of emergency in the northern Savanes region on 13 June 2022 due to incursions by jihadist groups linked to al-Qaeda and the Islamic State. Based in the Sahel region, notably Burkina Faso, these groups are seeking a foothold in northern Togo. Although security forces are stepping up their presence there, the threat remains and the state of emergency was extended for a second time in March 2023 for 12 months. Togo will continue to enjoy excellent relations with China, which will remain its main external creditor (with 21% of the total through China Eximbank) and its main trading partner. Relations with the International Monetary Fund and Western partners can sometimes be complicated by governance issues, but the country is asserting its role in regional security. In this respect, Togo will continue to maintain close relations with France, as well as with other West African countries concerned by the danger posed by Islamist groups.

Last updated: October 2023