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Burkina Faso Economic Outlook

Economic performance and outlook

Real GDP growth was estimated at 6.7% in 2017, up from 5.9% in 2016, due to gains in mining, higher investment in construction, a healthy commercial sector, and improvements in agriculture. The economy is projected to grow 6.6% in 2018, bolstered by a public investment program in the 2016–20 National Economic and Social Development Plan that covers energy, hydro-agricultural development, and road and telecommunications infrastructure. Higher prices for gold and cotton are also expected to boost economic performance.

Macroeconomic evolution

Higher investment under the National Economic and Social Development Plan and continued spending on social services and security will add to the budget deficit, estimated at 5.5% of GDP in 2017, up from 3.8% in 2016. Combined with greater public demand for social welfare in the run-up to the 2020 presidential election, the rhythm of investment and security challenges in the Sahel region will expand government spending in 2018–19. Strong economic growth is expected to reduce the budget deficit to 4.8% of GDP in 2018 and 2.9% in 2019. Public debt associated with the National Economic and Social Development Plan was estimated at 36.9% of GDP in 2017, far below the convergence criteria of 70% set by the West African Economic and Monetary Union (WAEMU), and is considered sustainable. Inflation was an estimated 1.5% in 2017, after falling 0.2% in 2016, and is likely to remain below 2% in 2018–19.

Tailwinds

Strong political support for the public investment program under the National Economic and Social Development Plan will substantially contribute to robust economic recovery. Burkina Faso also benefits from growth factors that can form the foundation of structural economic reform, including prospects in agro-ecology that are likely to accelerate growth in the rural sector, especially on the

4.9 million hectares of unused farmable land. Despite leading the continent in cotton production, Burkina Faso processes less than 1% of its production; substantial potential exists in large-scale cotton processing. The country also has vast, unexploited solar resources that could ensure the transition to renewable forms of energy. The strength of civil society and resilience of the country’s civil service are additional assets to the structural transformation of the economy.

Headwinds

The outlook for growth depends on several sources of instability, including terrorism, adverse weather for farming, persistent social unrest, and price volatility for gold and cotton. Terrorism constitutes the most serious risk. Since 2015, Burkina Faso has suffered a series of terrorist attacks that killed more than 70 people and slowed the economic recovery. The capital Ouagadougou was struck in January 2016 and August 2017, and terrorist incidents and threats persist along the country’s northern borders with Mali and Niger. The government has started to reorganize the military to more efficiently respond to security problems. Given the ongoing threat of terrorism in the Sahel, these challenges will continue to weigh heavily against the country’s socioeconomic outlook, especially public finances.