Benin is bordered by Togo to the west, Nigeria to the east, and Burkina Faso and Niger to the north. It has an estimated population of 10.6 million inhabitants as of 2014. With the support of its partners, Benin has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade.
Benin continues to enjoy a stable and democratic government. Since the end of the Marxist-Leninist regime in 1989, it has organized five presidential elections, seven legislative elections and three local elections peacefully. Current president Thomas Boni Yayi is ending his second term in power, and new elections are slated for February 2016. Legislative and local elections were held respectively in April and June 2015.
Real GDP grew by 5.4% in 2012, 5.6% in 2013, and an estimated 5.5% in 2014. Growth has been primarily driven by trade and agriculture. Continued improvements at the port of Cotonou have increased traffic and boosted efficiency, while favorable weather conditions have strengthened agricultural output. Cotton production was 240,000 tons in 2012/13, 307,000 tons in 2013/14 and is estimated at 393,000 tons for the 2014/15 season. Benin’s fiscal stance remains stable, and the overall fiscal deficit is estimated at 3.1% of GDP in 2014, following 3.7% in 2013 and 2.4% in 2012. Customs revenues slightly underperformed over 2014 as have domestic tax revenues. This was due to a drop in informal re-exports to Nigeria. Thanks to prudent fiscal policy, the overall budget deficit and balance of payments deficit remain at acceptable levels, and sovereign debt remains below 30% of GDP. Inflation was moderate at about 1% in 2013 and -1.1% in 2014, thanks in large part to low food and oil prices.
Poverty remains widespread in Benin, with national poverty rates of 37.5% in 2006, 35.2% in 2009 and 36.2% in 2011. Female-headed households experience lower levels of poverty (28%, compared to 38% for male-headed households), though women remain more vulnerable and continue to suffer from a lack of economic opportunities. Women are also underrepresented in high-level decision making positions. The education and health sectors continue to represent a significant share of annual public expenditure (on average 23% of public expenditure is allocated to education and 7% to the health sector). Significant efforts are needed to ensure more equity in the geographical distribution of resources and greater effectiveness and efficiency in the management of these two sectors.
Benin’s outlook for 2015 is clouded by the impact of declining global oil prices on Nigeria’s economy. The country is highly sensitive to trade policy decisions in Nigeria, as about 80% of its imports are destined for Nigeria via informal cross-border trade. As a result, minor policy changes in Nigeria can have a considerable impact in Benin. The declining world cotton prices is also a factor that can affect growth, and the ongoing government operations in the cotton value chain could have a significant fiscal impact. Despite the progress noted in the Doing Business 2015 report, Benin’s business environment continues to face significant challenges.
The government needs to accelerate reforms in order to access the $12 billion pledges made during the June 2014 Consultative Group in Paris. To guard against debt distress, financing plans for scaling up investments will need to be highly concessional. The country also needs a regulatory framework to attract public-private partnerships. The priority axes of reforms identified by the 2015 public expenditure management and financial assessment report include improvement of internal revenue collection, restructuring the financial control system, improving the governance for autonomous public institutions, and enhancing the accounting and budget information systems.
Last Updated: Oct 01, 2015