Burkina Faso is a low-income Sahelian country with limited natural resources. Its economy is largely based on agriculture, which employs 80% of the workforce, although gold exports have increased. Despite the progress made, Burkina Faso faces a number of development challenges, particularly in the areas of health and education. It currently ranks 144th among 157 countries on the new human capital index established by the World Bank and 40.1% of its population lives below the national poverty line. Furthermore, the deteriorating security conditions caused by terrorist attacks have created an unprecedented humanitarian crisis.
Security and Sociopolitical Situation
Growing insecurity, particularly in the north along the border with Mali and Niger, has displaced several communities in Burkina Faso. While there were fewer than 50,000 internally displaced persons (IDP) in the country in January 2019, a report issued by the National Council for Emergency Assistance and Rehabilitation (CONASUR) put this figure at more than one million at the end of December 2020. This IDP population, approximately 54% of whom is under the age of 15, is composed of 53% women and 47% men. In June 2020, more than 2,500 schools were closed, depriving 350,000 children of an education.
On the political front, presidential and legislative elections were jointly held in November 2020. The incumbent, President Roch Marc Christian Kaboré, was reelected in the first round, garnering 57.74% of the votes. The ruling People's Movement for Progress (MPP) party and its allies secured a comfortable majority in the National Assembly.
- As a result of steps taken to contain COVID-19, year-on-year real GDP fell by just over 5% during the first half of 2020. Favorable terms of trade and the implementation of the emergency government plan designed to counter the effects of the COVID-19 crisis paved the way for an 8% year-on-year turnaround in the third quarter. Real GDP grew at an estimated 0.6% over the year.
- The current account deficit narrowed from 4.8% of GDP in 2019 to 2.6% in 2020, owing primarily to an improved trade balance through increased gold export revenues (85% of exports) driven by higher international prices and to a decline in oil imports fueled by lower international oil prices.
- Inflation turned positive again in 2020 owing to the COVID-19 shock (3.2% compared to -3.2% in 2019). This pressure was chiefly driven by high food prices and the gradual increase in rental costs and energy prices.
- The fiscal deficit stood at 5.6% in 2020 (3.2% in 2019), owing to the deferral or temporary cancellation of taxes, additional COVID-19-related expenditure, and increased spending on security. This deficit was financed by a mix of concessional external financing (35%) and domestic debt (65%). Overall, public debt, which grew from 42.7% in 2019 to 47.6%, is sustainable and Burkina Faso’s risk of global and external debt distress continues to be moderate.
- The economy is expected to gradually recover, growing by 3.1% in 2021 and reaching 5% in 2022. Against a backdrop of uncertainty, the recovery initiated in 2021 is expected to be driven by a gradual rebound in services, continuing high gold production levels, and a stable agricultural sector.
- The steady deterioration in the trade balance and in net revenues as well as the stagnation of net transfers are projected to lead to a gradual increase in the current account deficit in the medium term.
- Inflation is expected to remain positive at around 2% in 2021. In view of the security threats that could reduce the food supply and the ongoing uncertainties surrounding the pandemic, inflation is expected to remain high in 2021, albeit below the 3% limit set by WAEMU.
- In light of the ongoing COVID-19 shock and the current security, humanitarian and social challenges, the fiscal deficit is expected to remain high in 2021 at 5.2% of GDP.
Last Updated: Apr 28, 2021