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 10.9 million inhabitants as of 2015. 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 six presidential elections, seven legislative elections and three local elections peacefully. Presidential elections held in March 2016 were won by the multi-millionaire and cotton sector tycoon, Patrice Talon. Since taking office in April 2016, the new government has resolved to promote better political and economic governance, and has plans for massive political and institutional reforms to consolidate democracy, reduce poverty, and attract investments.
Real gross domestic product (GDP) growth is projected to drop to 4.6% in 2016. The GDP growth rate was 4.6% in 2012, 6.9% in 2013, and 6.5% in 2014, and decelerated to 5% in 2015, mainly due to a slowdown of re-export activities to Nigeria and a drop in agriculture production. Cotton production, which represents 5% of GDP and 27% of exports, dropped to 300,000 tons over the 2015/2016 campaign, from 400,000 tons during 2014/2015 campaign. Furthermore, the economic slowdown in Nigeria has resulted in a drop in demand for informal re-exports from Benin, both as a direct result of slower growth and indirectly as a result of a depreciating Nigerian currency (Naira). In spite of the decline in economic activities in recent months, Benin GDP’s growth was among the best in WAEMU countries during the 2011-2015 period. Inflation is estimated at 0.3% for 2015 and is projected to remain under 3% in 2016. Inflation has typically remained below the 3% WAEMU target. After peaking in December 2012 (6.8%), inflation declined to 1% in 2013 and -1.1% in 2014.
Despite moderate GDP growth of between 4 and 5% annually over the past two decades, poverty remains widespread and on the rise in Benin, with national poverty rates of 37.5% in 2006, 35.2% in 2009, 36.2% in 2011 and 40.1% in 2015. Female-headed households experience lower levels of poverty (28% compared to 38% for male-headed households), and 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 is vulnerable to exogenous shocks, primarily: adverse weather conditions, terms of trade shocks (cotton and oil prices), and developments in Nigeria. The outlook for 2016 is clouded by the impact of declining global oil prices, which will be felt largely indirectly through Nigeria, as reduced growth there will affect Benin. Benin is also sensitive to Nigeria’s trade policy decisions, as 80% of Benin’s imports are destined there via informal cross-border trade. Other vulnerability risks to Benin include the contingent liabilities that comes with the government’s continuing control of the cotton sector.
The government needs to accelerate reforms to reduce poverty and promote shared prosperity. 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: Sep 28, 2016