The 2019 Annual Meetings of the African Development Bank Group will be held from 11-14 June 2019, in Malabo, Republic of Equatorial Guinea. Find out more
Real GDP growth improved to an estimated 1.4% in 2018, following a 0.2% contraction in 2017. The slight recovery in GDP was due to resurgence in the services sector (7.4%) following the return of relative calm, and increased production of key export items such as coffee and tea. Manufacturing and agro-processing also contributed to the recovery by growing at 3.2%. The transport and telecommunications sectors weathered the political instability and insecurity better than the construction and hotel and tourism sectors, which depend heavily on foreign financing.
The budget deficit for 2018 was an estimated 8.8% of GDP, up from 6.5% in 2017. The first quarter of 2018 recorded tax and nontax income that was 19.2% higher than in the first quarter of 2017, due mainly to 28.3% more tax revenue from domestic trade and 27.1% more from income. Public spending increases are expected to be 4.6% in comparison with 2017.
In 2018, the central bank continued an expansionary monetary policy that began in 2015. Inflation in 2018 was an estimated 12.7%, due mainly to higher food prices. The official exchange rate was 1,795 Burundian francs per US dollar in October 2018, compared with 1,670 in October 2015— a 3.5% depreciation. The parallel market sees increased pressure on the exchange rate: 2,710 Burundian francs per dollar in October 2018. The current account deficit fell slightly in 2018 to 10.4% of GDP from 11.6% in 2017.
Economic growth is projected to continue at a slower pace— 0.4% in 2019 and 1.2% in 2020— driven primarily by increased production and export of coffee and tea, improved terms of trade (from −11.7% in 2018 to 1% in 2019), and higher investment (from 11.8% of GDP in 2018 to 12.4% in 2019). Inflation is projected to nearly double to 22.1% in 2019 and 23.1% in 2020. With a portion of international assistance frozen, the budget deficit is projected to remain at 8.8% in 2019 but to worsen to 10.3% in 2020. The current account deficit is projected to fluctuate between 9.2% in 2019 and 11.2% in 2020.
Several strengths and opportunities, if tapped, will have a considerable impact on growth and job creation. They include underexploited mining potential for peat, limestone, nickel, coltan, phosphates, vanadium, carbonatites, and other minerals; exploitable hydropower potential of 1,300 MW, with less than 40 MW tapped; and the development of the 650 kilometer Lake Tanganyika, whose roughly 10 ports could make it an interregional trade hub. In this regard, renovating Bujumbura port will boost trade, especially among countries of the subregion, such as Democratic Republic of Congo, Rwanda, Tanzania, Uganda, and Zambia.
These economic prospects are filled with uncertainty. Agricultural production remains vulnerable to climate shocks, as happened in 2015 when flooding caused by El Niño was followed by drought. Burundi is also subject to international sanctions that reduce foreign aid that could finance development. The country will have to find new sources of finance if the situation does not change.
Finally, the economic prospects face political and economic uncertainty, especially as the 2020 elections approach. Fragility persists in weak capacity, widespread poverty and youth unemployment, and low capacity to generate or use fiscal space.