Togo Economic Outlook

Economic performance and outlook

Economic growth was estimated at 4.5% in 2017, down from 5% in 2016, but is projected to return to 5% in 2018. If rainfall amounts remain favorable, growth could reach 5.3% in 2019. Agriculture remains the foundation of the economy, accounting for 1.7 percentage points of growth in 2017. In 2018/19, the tertiary sector is likely to benefit from the increased capacity of the port of Lomé due to the installation of modern transshipment equipment. However, the political protests that have slowed economic activity since August 2017 could lead to a downward revision of growth estimates for 2017 and projections for 2018 and 2019.

Macroeconomic evolution

In 2015/16, the government took on large debts to finance investment. Debt rose from 73.3% of GDP in 2015 to 79.2% in 2016, exceeding the 70% threshold set by the West African Economic and Monetary Union. The International Monetary Fund (IMF) is monitoring the increase under its 2017–19 Extended Credit Facility (ECF), with a view to reducing it to 69.9% in 2019. The government’s policy to reduce public investment is expected to reduce the budget deficit from 9.8% of GDP in 2016 to 4.7% in 2019. The external current account deficit is projected to improve from 9.7% in 2016 to 6.8% in 2019 as a result of reduced government imports. Inflation approached zero (an estimated –0.3%) in 2017. Combined with a strong appreciation of the CFA franc, this could impede exports. The Central Bank is pursuing an accommodative monetary policy by setting the key interest rate below 3%.

Tailwinds

Togo is aiming to stabilize public finances under a program launched in January 2017 under the ECF. The first IMF review, conducted in October 2017, concluded that all quantitative performance criteria had been met and that structural reforms were being pursued. In 2017, the government began to reduce its capital expenditure to 14% in 2018 and to 4.3% in 2019. These reductions are expected to end pre-financing mechanisms for public investment through commercial banks, thereby reducing the dominance of the government in financing economic activity. Private investment will become the main source of wealth creation, with a projected annual growth rate above 10% between 2017 and 2019. The acceleration of property transfers will encourage private investment, whose share in total investment is expected to increase from 52% in 2015 to 60% in 2017, then to 62% in 2018 and 64% in 2019.

Headwinds

Although Togo has made progress on the path to development, most of its population has not yet benefitted. Half of the Togolese people have no access to drinking water or electricity, and 55.1% live in poverty; the country has only one doctor per 14,500 inhabitants. The training provided by public higher education institutions does not reflect the needs of the labor market or the development challenges that the country faces. Togo ranks 162 on the United Nations Development Programme’s (UNDP) 2016 Human Development Index; according to UNDP, 51% of the population lives in multidimensional poverty. In a context marked by the resurgence of political demonstrations, the organization of legislative and local elections in 2018 and a possible referendum on the constitution could hamper economic activity.

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