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Benin Economic Outlook

Macroeconomic performance

Real GDP growth was an estimated 6.0% in 2018, up from 5.4% in 2017, due to good performance in agriculture, especially cotton (with 5.6% growth); the industrial sector (6.7%), driven by cotton ginning plants (18%); and the building and public works sector (8.5%). The services sector grew by 7.5% because of dynamism in transport, post, and telecommunications (with 10.6% growth); banks and other financial institutions (9.5%); and trade and the food and hotel industries (6.9%). On the demand side, growth was driven mainly by final consumption (up by 3.6%). The trade deficit fell slightly to 8.3% of GDP from 9.1% in 2017.

The budget deficit (including grants) declined to an estimated 4.7% of GDP in 2018, from 5.9% in 2017, due to mobilizing revenue (1.2% of GDP) and reducing current expenditures. Domestic debt (60% of total public debt) was 30.9% of GDP, and the risk of debt distress went from low to moderate. Benin operates a common monetary policy established by the Central Bank of West African States. The inflation rate increased to an estimated 1.6% in 2018 from 0.1% in 2017.

Tailwinds and headwinds

Real GDP growth is projected to be 6.3% in 2019 and 6.8% in 2020. Growth in the raw materials extractive sector is projected to reach 5.7% in 2019, driven mainly by the cotton sector. Industrial growth is projected to expand by 13.3% in 2019, owing to building and public works (growing by 25%) and the electricity and water sectors, projected to grow 8% as the 120 MW Maria- Gléta power plant begins production. The budget deficit is projected to level off at 2.6% of GDP in 2019 and 1.9% in 2020. Total public debt is projected to fall to 53.3% of GDP in 2019 and 48.9% in 2020.

Under the 2017–25 Strategic Plan for the Development of the Agricultural Sector and the 2017–21 National Plan for Agricultural Investments, Food, and Nutrition Safety, seven agricultural development poles were created in 2017. The strategy to promote several subsectors— maize, rice, cotton, cashew, cassava, and pineapple— is ongoing.

Business creation procedures have improved. Electricity sector reforms initiated in 2016 should improve governance and double installed capacity to 500 MW by 2021. The gross enrollment ratio was estimated at 124.82% in 2015, and implementing the 2018–21 National Policy of Education should improve the sector. In the fight against HIV/AIDS, progress is visible, with prevalence estimated at 1%.

Benin is a member of the African Union, the Economic Community of West African States (ECOWAS), and the West African Economic and Monetary Union. Benin is highly integrated with the regional market: 70% of its exports go to the ECOWAS zone (mainly Nigeria). However, regional trade opportunities have been reduced since 2015 due to economic reforms in Nigeria removing oil and gas sector subsidies and banning the re-export of rice, used cars, and used clothing. The port of Cotonou remains a transit corridor for hinterland countries such as Burkina Faso, Mali, and Niger. Benin is also integrated into the regional capital markets and is host to subsidiaries of regional banking groups. The free movement of people remains hampered by unofficial border barriers, which raise transaction costs. The main challenges for the country are diversifying exports and modernizing trading services and trade and transport services.

Economic growth prospects are good but remain vulnerable to external shocks, especially rainfall, global cotton and oil prices, and changes in Nigeria’s economic situation.