Burkina Faso Economic Outlook
Real GDP growth continued at an estimated 7.0% in 2018, compared with 6.7% in 2017. Key contributors were food agriculture (up 14.2% in 2018), extractive industry (20.5%), and cotton ginning (8.0%). Final consumption was the main component of domestic demand. The tax burden rose to approximately 18.0% of GDP in 2018 from 16.5% in 2017, while total outstanding public debt declined from 36.6% of GDP to 33.4%. Inflation increased to an estimated 1.4% in 2018, reflecting higher food prices. The current account deficit improved to an estimated 7.2% of GDP in 2018 from 7.6% in 2017.
Tailwinds and headwinds
Real GDP growth is projected to be 6.0% in 2019 and 5.9% in 2020, driven mainly by cotton ginning, cash crop farming, and financial services. As cooperation with China resumes, anticipated investment in such sectors as energy should strengthen economic growth— installed electricity generation capacity is projected to reach 1,000 MW in 2020, up from 650 MW in 2018. On the demand side, final consumption and investment will remain the key drivers of GDP growth in 2019. Budgetary policy will aim to reduce the fiscal deficit below 3% from the estimated 4.9% in 2018. Key interventions will aim to improve agro-sylvo-pastoral productivity and raise the manufacturing sector’s contribution to GDP to 12% in 2020 from 8% in 2018. Burkina Faso is pursuing reforms in several sectors. In the energy sector, 2017 legislation broadened the powers of the Energy Regulatory Authority, and the construction of eight additional solar power plants is expected to add 100 MW to the country’s installed capacity. In the agricultural sector, Burkina Faso is pursuing development of growth poles, following the success of the Bagré Growth Pole Project. Establishing a cotton ginning unit in Koudougou should contribute to local transformation. The mining sector expected 15,000 new jobs and 3.5 billion CFA francs in investment in 2018. On the social front, about 10.8 million instances of illness in children under age 5 were treated under the free health care policy.
Burkina Faso is a member of the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU). But trade with regional partners remains weak, due partly to nontariff barriers. Interconnecting Burkina Faso’s customs system with Togo’s in May 2018 is expected to reduce the time spent at the Cinkansé checkpoints from a few days to about two hours. The free movement of goods and people faces racketeering and other obstacles, which have increased with the jihadist threat in the region. The banking system is integrated into the WAEMU payment system. Regional banking groups have quickly established their subsidiaries in the country.
Burkina Faso is a cultural crossroads in the ECOWAS region. It hosts such flagship events as the Panafrican Film and Television Festival of Ouagadougou and the International Handicrafts Fair of Ouagadougou.
Risks weighing on the country’s outlook come from social tensions, deteriorating security conditions, and price shocks due to rainfall and global commodity prices for oil, gold, and cotton. Burkina Faso is landlocked and depends heavily on its neighbors for transit, so that transportation costs can account for up to 60% of the cost of goods— a situation aggravated by poor infrastructure.