Burkina Faso is a low-income Sahelian country with limited natural resources. Its economy is largely based on agriculture, although gold exports are on the rise. More than 40% of the population lives below the 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.
The transition process is being implemented by three main organs: the President of Burkina Faso, the transitional government with a civilian prime minister, and a transitional legislative assembly.
The Economic Community of West African States (ECOWAS) and the African Union have suspended Burkina Faso from their decision-making bodies until constitutional order is restored. However, ECOWAS and the transitional authorities have agreed to the 24-month transition timeline.
Since 2015, the country has been the target of terrorist attacks that have resulted in population displacements. While there were fewer than 50,000 internally displaced persons (IDPs) in the country in January 2019, this number stood at over 1.8 million by December 31, 2022.
Economic Overview
After a strong recovery in 2021 with growth estimated at 6.9% (4.3% per capita), growth slowed to 2.5% in 2022 (-0.1% per capita). Growth was driven by the primary and tertiary sectors, which grew by 5.1% and 5.6%, respectively, thanks to the return of average rainfall and increased public support for public services. After strong growth in 2021, the secondary sector contracted by 4.9% in 2022 owing to the closure of several mines for security reasons.
Exports, which are heavily dominated by gold, fell by 0.6% in 2022, while imports increased by 1.7%, driven mainly by the purchase of hydrocarbons. This has widened the current account deficit, estimated at 5.2% of GDP compared to 3.0% in 2021, as defense spending increased fuel imports.
Domestic supply shocks caused by a poor harvest at the end of 2021 and insecurity, coupled with congestion effects on global supply chains as a result of Russia’s invasion of Ukraine, pushed inflation up to 14.1%, a 10-year record and the highest in the Sahel region.
Lastly, as a result of the sharp increase in defense and security-related spending (4.6% of GDP in 2022 compared to 3.4% in 2021), the structurally high public wage bill, and higher fiscal transfers, the fiscal deficit increased to 10.6% of GDP in 2022, up from 7.5% of GDP in 2021. At the same time, public debt stands at 54.3% of GDP, with high-interest domestic debt accounting for a significant share of the outstanding public debt.
Medium-Term Outlook
Over the medium term, and against a backdrop of uncertainty, real growth is expected to continue its pre-COVID-19 trajectory. Growth in 2023 is projected at 4.3% (1.7% per capita) and is expected to be driven by the agriculture and services sectors, and the resumption of gold mining operations.
Average annual inflation is projected to decline to 4.9% in 2023, reflecting lower global oil and food prices and assuming the security situation does not deteriorate further.
The fiscal deficit is expected to remain high at 6.9% of GDP, exceeding the target (4.7%) of the adopted budget, as a result of increased security spending and the inclusion of securitized debt related to fuel subsidies in the expenditure figures. Convergence toward the WAEMU target of 3% of GDP is not expected before 2027. Deficit financing will prove difficult as tighter global financing conditions have already increased the cost of financing on the WAEMU regional bond market and access to concessional financing remains limited. The return to civilian rule, scheduled for mid-2024, could lead to a resumption of concessional financing, which would contribute to debt sustainability.
If the security situation improves and the transitional agenda is implemented, growth is projected to improve over the medium term to 5.1% by 2025.
Poverty rates are expected to remain unchanged in 2023, with inflation offsetting income growth in poor households, before beginning a downward trend of about one percentage point per year. As this slight decline will merely offset the increase in population, the number of poor is expected to remain at approximately 7.5 million.
Persistent insecurity is the main risk to the outlook. In addition, a slowdown in global growth, higher inflation and international monetary tightening could lead to higher financing costs. The price of gold remains at historically high levels, but could fall in real terms, posing a risk to the current account and domestic revenue mobilization.
Last Updated: Mar 30, 2023
