major macro economic indicators
|2019||2020||2021 (e)||2022 (f)|
|GDP growth (%)||6.9||3.8||5.5||6.5|
|Inflation (yearly average, %)||-0.9||3.0||1.7||2.0|
|Budget balance (% GDP)||-0.5||-4.7||-4.5||-3.8|
|Current account balance (% GDP)||-4.0||-3.9||-4.0||-4.3|
|Public debt (% GDP)||41.2||46.1||52.3||48.9|
(e): Estimate (f): Forecast
- 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 shortcomings: corruption, rule of law, regulation
- Impact on economic activity and tax revenues of Nigeria’s economic policy decisions due to significant informal re-exports
- Terrorist threat from neighbouring Nigeria and the Sahel
- Low bank profitability, low government revenues
Strengthening of growth driven by foreign trade and public investment
After an upturn in economic activity in 2021, growth should maintain its upward trajectory in 2022, driven by trade, public investment and consumption. External demand, mainly for cotton (20% of exports), is expected to increase in response to the recovery of textile production among Benin’s trading partners, particularly in Asia (Bangladesh accounted for 69% of cotton exports in 2020), which should support exports. Besides brisk agricultural exports, services exports should be boosted from the recovery of port activity. In addition, the second phase of the Government Action Plan (PAG) is set to be launched to accompany President Patrice Talon's second term, supporting public consumption. Within this framework, the government plans to continue investing to modernise agriculture (29% of GDP) in order to increase yields (a 70% increase was expected in 2021 for the cotton sector). Public investment will also focus on infrastructure, particularly roads, with the aim of making the port of Cotonou the largest commercial hub in the sub-region and facilitating the flow of goods to landlocked regions. Thus, in addition to the agri-food industries, construction will boost the performance of the secondary sector (18% of GDP). The recovery plan, which includes subsidies for water and electricity, should support private consumption. This will promote the recovery of the services sector, which was hardest hit by the crisis and will be continue to be hurt by the limiting effects on tourism of persistent terrorism and health risks.
Higher global prices for food (particularly rice, which accounts for one-third of imports) and oil fuelled inflationary pressures at the end of 2021. However, the CFA franc’s euro peg should temper these pressures, allowing inflation to remain within the BCEAO's target window (1%-3%).
Slight improvement in public and current accounts
Although the government plans to increase public spending to finance the 2021-2026 PAG, it will benefit from increased tax revenues from port activity, helping to reduce the budget deficit in 2022. Benin will continue to receive significant aid from multilateral organisations to finance the programme. The country's risk of debt distress will be moderate in 2022, as more than 60% of its external debt (which makes up over 50% of public debt) is multilateral debt contracted on concessional terms. This should provide the country with the debt leeway to pursue development projects such as the construction of the "Cotton Road", partly financed by the ADB. Furthermore, after an initial Eurobond issue in 2019, the authorities raised nearly EUR 1 billion in two tranches in 2021 to help finance the PAG investments. Although 57% of external debt is denominated in euros, the CFA franc's peg to the European single currency limits the risk.
The current account deficit is expected to widen slightly in 2022, following the lead of the trade deficit: export growth driven by cotton sector performances will not offset the high imports linked to infrastructure construction. The balances of income and services, especially those related to project implementation, will still be in deficit, while the balance of secondary income will remain in surplus thanks to current international cooperation and inflows of expatriate funds. Direct and portfolio investment flows and loans from multilateral organisations should finance this deficit.
Pressure is already building in the president’s second term
Benin is traditionally one of the most stable countries in French-speaking Africa, but the political and social situation has become tense in recent years, amid mounting accusations of democratic backsliding under President Patrice Talon. In the April 2021 presidential election, the president, in office since 2016, was re-elected in the first round with 86.4% of the vote, benefiting from the absence of the main opposition candidates. In fact, the controversial adoption of a new electoral code in 2018 made it very difficult to participate in the elections, thus silencing the opposition. The two “Democratic” opposition figure, Joel Adjivo and Reckya Madougou, whose joint candidacy for the presidential election was rejected by the Beninese authorities, were sentenced to heavy prison terms in early December 2021 for "undermining state security" and "plotting terrorist acts". On the eve of the elections, the army intervened to break up demonstrations against the lack of opposition in the presidential elections and the politicisation of the judicial system. President Talon's second term in office could therefore result in increased public discontent and social unrest. However, the social initiatives planned during the second term, such as investment in education and health, could ease these tensions.
Meanwhile, piracy in the Gulf of Guinea may threaten the country's aspirations of becoming a regional transport hub. In addition, Benin is grappling with a precarious security situation due to the presence of jihadist cells in the border areas. Thus, the risk of terrorism is expected to remain high in 2022, as attacks by jihadist groups have already struck the north-western part of the country three times by December 2021.
Last updated: February 2022