Benin is a small country with a population estimated at just under 10 million in 2011. Important economic and structural reforms, supported by the IMF and the World Bank, helped Benin sustain its economic growth rates over the last decade. Nevertheless, poverty is still widespread and the economy remains undiversified and vulnerable to external shocks.
The national economy relies on the agriculture sector, in particular on cotton, transit and re-export trade. The agriculture sector accounts for about 32% of GDP and is the source of livelihood for nearly 70% of the country’s workforce. Cotton is the primary export commodity accounting for about 25 to 40% of official total exports. Re-export trade with Nigeria is estimated to represent approximately 20% of GDP and explains the vulnerability of the economy to trade policy changes in its neighboring and main trading partner.
The global economic and financial crisis contributed to a significant economic slowdown in Benin, and a widening of the fiscal and current account deficits. Growth decelerated in 2009 and 2010 further to weaker global demand for exports, a decrease in re-export trade, primarily to Nigeria, lower cotton production, lower foreign direct investment and the 2010 floods. A slowdown in activity at the Port of Cotonou in the second half of 2011, following resistance to and problematic implementation of a new Import Verification Program (PVI), reduced growth from a projected 3.8% to 3.5%. However, growth rebounded in 2012 (5.4%), thanks to significantly higher cotton production and increased port volumes and traffic. Growth projections for 2013 are estimated at 5%. These developments will have a positive impact on Benin’s macroeconomic fundamentals, its fiscal position and poverty alleviation.
In June 2010, the International Monetary Fund (IMF) approved a three-year Extended Credit Facility (ECF) arrangement for Benin. On August 28th 2013, the IMF completed the fifth review of the ECF, and its Board also approved a request for an extension of the arrangement to April 2014. This extension will allow for a re-phasing of the final disbursement and associated review and will give the authorities more time to implement the customs reform agenda.
Benin continues to enjoy a stable and democratic government with four presidential elections and four legislative elections organized peacefully since the end of the Marxist-Leninist regime in 1989. President Yayi Boni was reelected in March 2011 to a second five-year term and his alliance gained a majority in the National Assembly. Local and municipal elections are planned for 2013, but no specific date has been given yet, and efforts are currently underway to find solutions to correct the insufficiencies of the Computerized Permanent Electoral List (LEPI) which is being contested by opposition parties.
Key development challenges
The third Growth and Poverty Reduction Strategy (2011-2015) adopted by the Government in 2011 is currently under implementation. Benin aims to become an emerging economy by 2025 through increasing sustainable growth over the medium-term and making progress towards the Millennium Development Goals (MDGs). Increasing economic growth and raising per capita GDP will require that Benin increasingly capitalize on its comparative advantages in agriculture and its position as a regional trading center. Agricultural diversification and improved agricultural productivity will be key, as will an improved business environment in order to take greater advantage of Benin’s geographic position in serving the Nigerian market and its role as a gateway to land-locked countries to its north.
Despite progress in improving access to basic services, achieving the MDGs remains a significant challenge. Benin is on track to meet the MDGs for access to potable water in rural areas, eradicating hunger, and reduced HIV/AIDS prevalence. Attaining the rest of the MDGs would be difficult, however, without a sharp acceleration of the current trends. In particular, in the health sector, child and maternal mortality remain very high despite a sharp reduction over the last years. In education, the universal primary education goal and the completion rate goal for boys are likely to be reached, but the 2005 goal of parity in primary and secondary education has not been met and would not be reached by 2015 without reinforced effort. Furthermore, improving the quality of education and the management of the sector remain key challenges. Finally, while Benin is in a position to meet the MDG for rural water supply, reaching the sanitation goal would be very challenging, even with sustained actions.
Last updated: September 2013