Burkina Faso is a low-income Sahelian country with limited natural resources. Its economy is based on agriculture and mining, particularly gold. More than 40% of the population lives below the national poverty line. Burkina Faso ranks 184th out of 191 countries in the 2021–2022 HDI report of the United Nations Development Programme (UNDP).
Political Context
After the September 30, 2022 coup that overthrew Lieutenant Colonel Paul Henri Sandaogo Damiba, Captain Ibrahim Traoré was sworn in as the new transitional president on October 21, 2022. Under the Transition Charter, he will not be eligible to run in the next presidential elections.
Burkina, Mali and Niger have created the Alliance of Sahel States (AES), within which they intend to pool their efforts against terrorism through a common defense architecture. These countries have also decided to leave the Economic Community of West African States (ECOWAS) on January 28, 2024, citing in particular a lack of support in the face of terrorism. Indeed, since 2015, Burkina has been the target of terrorist attacks causing population displacement. While there were fewer than 50,000 internally displaced persons (IDPs) in the country in January 2019, this number stood at over 2.06 million by December 31, 2023, according to the United Nations Office for the Coordination of Humanitarian Affairs.
The health and education sectors are heavily impacted, with 413 health facilities affected (20%) by December 2023, limiting access to healthcare for around 3.8 million people; 5,330 primary and secondary schools are closed, representing 20% of school infrastructure, affecting 820,865 pupils including 396,716 girls.
Economic Overview
In 2023, the economy is estimated to have grown by 3.2% (0.5% per capita), up from 1.5% in 2022. The services sector, accounting for 48% of GDP, remained the main growth driver, fueled by an expansion of the public sector. Agricultural sector growth was hindered by security challenges, which restricted access to rural areas. Secondary sector growth was kept positive only by manufacturing and construction, while gold production dropped further due to insecurity despite high international gold prices. On the demand side, private consumption was the main growth driver, bolstered by low inflation. In contrast, investment is expected to stagnate given high public investment in 2022 and uncertainties in the mining sector. Favorable terms of trade with an increase in gold prices coupled with a decrease in energy prices helped narrow the current account deficit to 4.9% of GDP in 2023.
After surging to a record high of 14.1% in 2022, inflation fell to 0.7% in 2023 with declines in local product prices, particularly for cereals, flour, and fresh vegetables. As a result, the extreme poverty rate, which was rising through 2022, has decreased by 0.7 percentage point to 25.6% in 2023. However, the humanitarian situation remains very critical, with around 2 million internally displaced persons, and an estimated 2.3 million facing severe food insecurity as of December 2023.
The country started fiscal consolidation in 2023 with the deficit falling to 6.5% of GDP – 1% lower than 2022 (excluding a one-time inclusion of all accumulated securitized debt in 2022). The consolidation was expenditure-driven, through a scaling back of capital investment and subsidies (helped by lower international oil prices), while military and humanitarian spending remained high. As bilateral donor grants declined, efforts were made to sustain domestic revenue mobilization. With a still elevated fiscal deficit, public debt is estimated to have crossed the 60% of GDP mark in 2023. The share of expensive regional financing is increasing; in February 2024, Burkina Faso’s average yields on the regional bond market were 8% for 6-month T-bills and 9.6% for 3-year T-bonds. The risk of external debt distress remains moderate.
Medium-term outlook
The outlook hinges on the security situation. If the situation does not deteriorate further, growth could slowly pick up and average 4% (1.5% per capita) over 2024-26, driven by recovering mining and agricultural production and service sector growth. This includes the expected impacts of an orderly ECOWAS withdrawal: lower trade with non-WAEMU ECOWAS states, higher investors’ risk premia, and increased regional financing costs.
If the government continues its fiscal consolidation path, the fiscal deficit is expected to gradually decline towards the WAEMU ceiling of 3% of GDP. Public debt as a share of GDP is forecast to rise at least until 2025, driven by high interest rates on domestic debt.
Poverty is expected to remain relatively unchanged over the medium term. While inflation has come down dramatically and is expected to remain below 3% over the medium-term, accelerating poverty reductions will require higher growth per capita, particularly in agriculture which employs 71% of the poor.
The outlook remains subject to significant downside risks, including a deterioration in the security situation, political instability, climatic shocks, terms of trade shocks, and the withdrawal from ECOWAS.
Last Updated: Mar 27, 2024
