Macroeconomic Performance
Table 1: Overview of some macroeconomic indicators
The Beninese economy exhibited robustness in 2023 in the face of myriad shocks, including the impact of constrained trade with Niger on the back of the financial and economic sanctions imposed by ECOWAS, which required it to close its borders with the country. Moreover, the macroeconomic challenges in Nigeria, particularly the depreciation of the naira, adversely affected trade between the two countries. In spite of this, the Beninese economy grew by 6.4 per cent in 2023, underpinned by strong growth in agriculture, industry and services. After being one of the few countries to experience lower inflation in 2022, relative to 2021, average inflation doubled to 2.8 per cent in 2023, mainly as a result of higher fuel prices, as the removal of fuel subsidies in Nigeria spilt over into the economy. The fiscal consolidation efforts of the government continued to yield fruits, with fiscal balance tightening further to -4.5 per cent of GDP, from -5.6 per cent in 2022, while the debt-to-GDP ratio held steady at 54.2 per cent in 2023, just as in 2022. The current account balance improved to -5.6 per cent of GDP in 2023 from -6.0 per cent of GDP in 2022.
Outlook
The Beninese economy is projected to slow to a growth of 6.1 per cent and 6.0 per cent in 2023 and 2024, respectively, on the back of subdued electricity supplies from Nigeria and high fuel prices, a continued border reopening stand-off with Niger, among other factors. The high energy prices are projected to drive average inflation up to 3.0 per cent in 2024 before tapering to 2.1 per cent in 2025. Fiscal balance is projected to continue on a path of consolidation, ending at -3.7 per cent of GDP and -3.1 per cent of GDP for 2024 and 2025, respectively. This effort will be driven by projected revenue increases. The debt-to-GDP ratio is projected to climb marginally to 53.4 per cent of GDP in 2024 before declining to 52.4 per cent in 2025. Benin’s current account balance is projected to widen to -5.8 per cent of GDP in 2024, declining to -5.3 per cent of GDP in 2025.
Probable Headwinds
The threat by Burkina Faso, Mali and Niger to leave ECOWAS, if actioned, could adversely affect revenue generation in Benin through a possible reduction in transit trade with the aforementioned countries. The country is also exposed to a potential spillover of terrorist attacks in its northern regions from Burkina Faso and Mali. This would affect agricultural output and lead to displaced populations in the northern regions. Furthermore, a worsening of the erratic electricity supply from Nigeria could hamper the growth in economic activity.