major macro economic indicators
|2017||2018||2019 (e)||2020 (f)|
|GDP growth (%)||0.5||1.7||1.9||-5.5|
|Inflation (yearly average, %)||16.1||-2.6||-0.8||5.5|
|Budget balance (% GDP)||-4.5||-4.9||-4.4||-4.7|
|Current account balance (% GDP)||-11.3||-11.8||-9.7||-8.3|
|Public debt (% GDP)||44.2||50.9||53.8||55.5|
(e): Estimate. (f): Forecast. *Grants included. **Fiscal year from July 1st to June 30th.
- Natural resources (coffee, tea, gold)
- Member of the East African Community (EAC)
- World’s second-largest nickel reserve (6% of the total) and rare earth development
- Entrenchment of the political crisis that began in 2015
- International assistance reduced because of the political crisis
- Border tensions with Rwanda
- Economy poorly diversified and vulnerable to external shocks
- Geographically isolated
- Activity hampered by lack of infrastructure and access to electricity
- Decrease in the labour force as the political crisis has forced people to flee the country
Growth still limited by the absence of donors
The tense political and social situation will continue to weigh on the economy. Growth will remain moderate in 2020. Assuming normal weather conditions, agriculture is expected to maintain its growth rate. The increase in international coffee prices forecast for 2020 is expected to drive an upturn in production. The population, which is largely dependent on agriculture (36% of GDP and 90% of jobs), will benefit from the resulting increase in incomes, generating a positive contribution to growth from private consumption (83% of GDP). However, plans to nationalize the coffee industry represent a downside risk, as the government’s intervention may prove detrimental to foreign investment. Mining is likely to make a strong contribution. As a mainstay of development, it receives government support through the allocation of operating licences to encourage private investment. The importance of the sector has been growing since the United States stated that it wanted to diversify its rare earth supply following the trade dispute with China. Burundi is the only African country currently producing rare earths, thanks in particular to Rainbow Rare Earths, which owns the Gakara mine. Rare earth development has made the mining sector the main contributor of foreign exchange ahead of coffee and tea. However, industrial growth is expected to slow due to weak investment and a persistently challenging environment. Inflation will return to positive territory.
Persistent twin deficits
The budget deficit will widen in 2020 due to the increase in public spending related to elections this year. According to the budget approved by parliament, expenditures will rise by 8.3% in 2020, with 61% of the amount going towards the State’s current expenditure, more than half of which consists of wage costs. State revenues, which are expected to increase by 7.3%, will come from tax revenues, grants, non-tax revenues, exceptional revenues (from the privatization or liquidation of state-owned companies), as well as financial investments. The government will use the domestic market to finance itself by issuing treasury bills and bonds (more than 80% of the total), calling on the central bank as a last resort. Public debt is 70% domestic.
The current account deficit is expected to continue to shrink in 2019, despite the decline in expatriate remittances and official transfers. The trade balance is structurally in deficit due to substantial imports of manufacturing products and oil, which are expected to mark time in 2020. The deficit will be contained by the slight increase in exports of mining products (38.2% of the total) and agricultural products (43%). The low level of external aid will be insufficient to finance the current account deficit. Growth in FDI, thanks to government support, should also contribute to the financing and reduce use of the central bank’s foreign exchange reserves (0.9 months of imports in June 2019), which will continue to decline nevertheless, accentuating the depreciation of the Burundian franc and the lack of liquidity in the economy.
A high-risk election year
President Pierre Nkurunziza has said he will not run again in the next presidential election scheduled for May 20, 2020, although he is legally entitled to do so, following a widely criticized constitutional amendment in May 2018 to extend presidential terms. At the time of writing, no successor had been nominated as the candidate of the ruling CNDD-FDD party, which is expected to win with minimal hindrance, as the small opposition is unable to mobilize support. Stricter rules governing elections under the new electoral code adopted on May 20, 2019, including steep application fees for the submission of candidatures, will further hamper the opposition’s prospects in the upcoming elections. Mr Nkurunziza’s government is under little pressure to make concessions, as the opposition has been severely weakened by successive crackdowns since the political crisis surrounding the 2015-16 elections. International surveillance of the country, particularly by the EU, has intensified in recent months, partly in the lead-up to the elections but also because of measures taken by the President to consolidate power and restrict international intervention. In March 2019, the government closed the UN Human Rights Office in the country, stating that it had made sufficient progress in improving the human rights situation and that the office’s presence was therefore no longer necessary. The Southern African Development Community (SADC) has rejected Burundi’s application for membership due to ongoing political crisis, which is also undermining efforts to improve the business environment (166th out of 190 in the Doing Business 2020 ranking).
Last update : February 2020