Population 9.351 million
GDP 7.541 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
2.6 |
3.2 |
3.4 |
4.6 |
|
Inflation (yearly average) (%)
|
2.3 |
2.7 |
6.5 |
3.3 |
|
Budget balance (% GDP)
|
-3.3 |
-4.3 |
-3.9 |
-3.6 |
|
Current account balance (% GDP)
|
-8.2 |
-9.6 |
-8.6 |
-6.5 |
|
Public debt (% GDP)
|
30 |
31.5 |
32.4 |
28.4 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Strategic geographic position
- Substantial support from foreign donors; debt cancellation under the HIPC and MDRI initiatives
WEAKNESSES
- Poor economic diversification
- Erratic electric power supply
- Deficiencies in governance (regulatory quality, corruption)
- Limited financial intermediation
Risk assessment
Rise in cotton exports and recovery of port activities
Economic growth is expected to accelerate in 2013 thanks to the increase in cotton exports (12% of foreign sales) and the recovery of port activities. The capacity of the Port of Cotonou, from which come most of the revenues from customs and services, is expected to grow. A French company plans to invest FCFA 130 billion (or 4.7% of GDP) to modernise and extend the port facilities. Meanwhile, the government is planning to continue investing in infrastructures (construction of new ports and airports, in particular). Benin is also expected to continue its efforts to improve electricity supply thanks to the privatisation of the Benin electrical energy company (SBEE). This is expected to stimulate growth. However, foreign direct investments in Benin will remain weak, limited by the shortcomings in the business environment.
In 2012, the abolition of energy price subsidies in Nigeria triggered a rise in Benin fuel and transport prices. However, the monetary policy conducted by the Central Bank of the West African States has made it possible to limit the rise in inflation. Oil prices are expected to be more stable in 2013 and inflation slower as a result.
Prudent budget management and a deficit reduction
The fiscal deficit is expected to fall slightly in 2013, provided that the government meets its IMF commitments and continues to keep spending under control. However, the Fund requires the authorities to speed up reforms and focus on broadening the tax base, respecting the fiscal rules, modernising the civil service and improving the efficiency of public companies. Aware of the progress the country has made, the IMF released an additional $16 million in March 2012 under a three-year Extended Credit Facility. It should furthermore be remembered that the public debt burden has been brought down to a manageable level since 2006, thanks to the debt cancellation obtained under the MDRI.
Despite the fall in exported raw materials prices, higher cotton production associated with a fall in food imports should enable a reduction in the trade deficit. The structural deficit of the balance of services is expected to decline in 2013 due to the increase in commercial services (transit activities) provided to Nigeria and Niger. The revenue balance deficit is expected to remain limited due to low interest payments on foreign debt, itself due to the amount of concessional funding. Encouraged by the adherence to the economic and political reform programme, donors are expected to provide the country with aid, enabling a further reduction in the balance of transfers deficit. These combined effects will enable a reduction in the current account deficit.
Insecurity depressing the business climate
Benin’s political situation is stable. President Boni Yayi was elected for a new 5-year term in 2012, a result reinforced by the achievement of a parliamentary majority in the April 2011 general elections. Supported by a majority in the Assembly, the president has the room for manoeuvre necessary to successfully carry out his reform programme. However, popular discontent – already strong due to frequent electricity failures and accusations of corruption among civil servants – is expected to be stronger in 2013. Demonstrations are expected, particularly in opposition to the privatisation of the last providers of public services and the implementation of a restrictive fiscal policy. Despite some progress, the business environment remains marked by endemic corruption and the poor quality of regulation. Benin also has to grapple with problems of maritime insecurity (piracy), which means some maritime trade is redirected to Nigeria.
