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Mali Economic Outlook
The economy’s strong growth continues, with real GDP growth an estimated 5.0% in 2018, down slightly from 5.3% in 2017, driven mainly by agriculture (cotton in particular) and services (financial activities and trade). On the demand side, household consumption is the primary driver. The budget deficit was reduced from 2.9% of GDP in 2017 to an estimated 2.5% in 2018. Public debt stood at 35.9% of GDP in 2018, up narrowly from 35.6% in 2017, but external debt declined slightly to 24.1% of GDP. Mali continues to face a moderate risk of debt distress. Inflation slowed to an estimated 1.7% in 2018 thanks to lower prices of foodstuffs and imported oil products. In the external sector, the current account deficit rose slightly from 6.0% in 2017 to an estimated 6.5% in 2018, with import growth (9.3%) outpacing export growth (7.2%).
Tailwinds and headwinds
Real GDP growth is projected to slow in 2019 to 4.7% and remain there in 2020. Inflation is projected to be 1.7% in 2019 and 1.8% in 2020. The budget deficit is projected to shrink gradually from 2.4% of GDP in 2019 to 1.5% in 2020 thanks to consolidation. The current account deficit is projected to remain above 6% through 2020.
Mali has begun to mobilize more revenue and increase the efficiency and quality of public spending, aiming to create the fiscal space required for public investment. It is streamlining tax exemptions, improving the efficiency of the mining tax regime, and strengthening the administration and efficiency of value added tax recovery. The government has also set up a consultation framework to facilitate the implementation of the 2015 peace agreement.
Authorities began to implement a law against illicit enrichment, in particular by requiring senior civil servants to declare their assets. In the energy sector, reforms have sought to strengthen the finances of the public company, Électricité du Mali, to mitigate associated budgetary risks and to free resources for investment and spending in other areas.
Mali has ratified all agreements relating to the free movement of persons and labor within the framework of the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union. No measure limits the movement of persons or the right of establishment in self-employment, and ECOWAS nationals need no residence permit and can settle freely in Mali to work or to exercise a liberal profession. However, in practice these rights are hindered by unofficial obstacles at the border, where multiple checkpoints of various kinds create high transaction costs.
The economic outlook could be compromised by several factors, in particular security conditions related to delays in implementing the Peace and Reconciliation Agreement and exogenous shocks such as climate variability, the volatility of gold and cotton prices, and fluctuations in the euro/dollar exchange rate. The recapitalization of some commercial banks has contributed to banking sector stability, but the high ratio of nonperforming loans (16.5% in 2018) could threaten private sector financing.