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Togo Economic Outlook
Recent macroeconomic and financial developments
Real GDP growth declined to 5.5% in 2022 from 6.0% in 2021 due to the security crisis in the far north of the country and Russia’s invasion of Ukraine. Inflation rose from 4.6% in 2021 to 7.8% in 2022, driven by higher food and energy prices. The fiscal deficit widened from 4.7% of GDP in 2021 to 8.4% in 2022 due to purchasing power support measures (subsidies and tax exemptions for basic products) as well as additional security spending. The current account deficit widened from 0.9% of GDP in 2021 to 3.7% in 2022 due to higher costs of imported goods (oil and food) brought about by the disruption of supply chains during the COVID- 19 pandemic and the effects of Russia’s invasion of Ukraine. Loans to the private sector to boost economic activity increased 14.3%, to 32.8% of GDP. The nonperforming loans ratio fell from 12.0% in 2021 to 8.1% in 2022 due mainly to the recovery of overdue loans and favorable monetary conditions in the west African Economic and Monetary Union, which allowed banks to lighten their balance sheets to restore their capacity to finance the economy. Risk of debt distress is moderate. Public debt dropped to 55.9% of GDP in 2022 from 63.1% in 2021 thanks to debt management measures.
Outlook and risks
Real GDP is projected to grow 6.3% in 2023 and 6.6% in 2024 thanks to the government’s 2025 roadmap for infrastructure projects and economic, financial, and structural reforms, including those aimed at boosting agricultural production and yields. Inflation is projected to fall to 3.8% in 2023 and 2.6% in 2024 thanks to purchasing power support from the government. The current account deficit is projected to widen slightly to 6.1% of GDP in 2023 and 6.3% in 2024 on higher import growth than export growth. The fiscal deficit is projected to narrow to 6.6% of GDP in 2023 and 5.1% in 2024 due to continued public financial management reforms. Possible headwinds include unfavorable fluctuations in global phosphate and oil prices, prolongment of Russia’s invasion of Ukraine, repeated terrorist attacks in the country’s northern regions, and the effects of climate change.
Climate change issues and policy options
Obtaining private financing for climate change and green growth is challenging for Togo. The estimated finance needed to adequately address climate change is $7.0 billion over 2020–30, or $702.6 million a year. The estimated cost of losses and damages due to adaptation is $2.7 billion, or 38.8% of total financing need, and the financing gap averages $560 million a year. This gap could severely limit the country’s ability to build climate resilience and promote green growth and calls for private sector mobilization. Of the $126 million in climate finance over 2019–20, only $17.4 million (14%) was provided by the private sector. The private sector is thus being called on to strengthen access to electrical power by providing individual solar kits and to fight coastal erosion in order to ensure environmental sustainability and mitigate the effects of climate change.
