APA-Cotonou (Benin) With rational management of public expenditure and growing economic potential, Benin is overcoming the crisis linked to the Covid-19 pandemic, which offers the country a stable outlook.

Benin enjoys political stability. This climate has allowed the State to deploy its Government Action Plan (PAG) over the years, bringing together large-scale development programs, in response to the challenges of economic growth.

Thanks to massive investments, Benin is positioned in the category of middle-income countries with a Gross Domestic Product (GDP) of 6.4%. But, because of Covid-19, this growth should reach 3.2% in 2020 where several countries in the world are in recession, according to an information note received at APA.

This is despite the fact that the country depends heavily on informal re-export and transit trade with Nigeria (estimated at around 20% of GDP) as well as on agriculture (70% of GDP), especially cotton, the main export product.

The country has shown stable and robust growth over the past two decades. However, poverty remains widespread with a low level of growth per capita estimated, according to the World Bank, at an average of 1.5% over the period 2008-2018.

“The national poverty rate stood at 38.2% in 2020 compared to 40.1 in 2015". Resilient, with a less impacted GDP (+3.2%), Benin is in first place in the West African Economic and Monetary Union (UEMOA) area.

Reform of the state apparatus

The Government Action Plan (PAG) has made it possible to reform state governance. The vision, driven by Patrice Talon, led the International Monetary Fund (IMF) to award a “very good” rating to Benin for its management of public finances.

The business environment, on the other hand, has seen a qualitative leap, ranking the country 76th in the Logistics Performance Index and 149th out of 190 countries in the World Bank's Doing Business ranking on business regulation.

In the current economic context, Head of State Patrice Talon plans to finance government actions from the country's own funds so as not to explode in external debt, in the face of the global economic slowdown linked to the Covid-19 pandemic.

With this in mind, the government has initiated nearly fifty reforms, the scheduling of which will be monitored by the Beninese Minister of Economy and Finance, Romuald Wadagni, distinguished “best minister in Africa” by the Financial Afrik awards.

These reforms should make it possible to create regional growth poles, decentralize investments, promote access to drinking water and electricity, streamline fiscal policy and access to credit and public procurement.

They also aim to improve banking, procedures for obtaining land titles and building permits, rationalize state revenues, fight corruption, and create a one-stop shop for cross-border trade procedures.

A growing potential

Benin has made progress in creating businesses and connecting to electricity, an indicator welcomed by the World Bank. The State has increased investments in the primary sector, but wants to meet the challenge of modernizing agricultural sectors.

The industrialization of sectors with high growth potential is on the agenda of Patrice Talon, who wants to bring added value to the various sectors, both in the primary, secondary and tertiary sectors with a view to balanced and sustainable development.

Socio-economic infrastructures, technological innovation and the digitalization of processes are an essential link in the Government Action Plan. And this, with a view to a structural transformation of the economy.

Valorizing the energy mix is a priority for the State. Connecting a new power plant to the electricity grid increased the electrification rate from 46.6% to 55.1% between 2015 and 2020, a rate that the government intends to increase in the coming years.

Benin enjoyed solid economic performances between 2016 and 2019 with an average real GDP of 5.5%. But since August 2019, the decision of Nigeria, its main economic partner, to close its land borders with its neighbours has dealt a major blow to the country's economy.

Despite relative resilience, economic activity in Benin decelerated to 6.4% in 2019 compared with 6.7% in 2018 (i.e. a GDP per capita growth rate of 3.5%). Re-export operations for Nigerian products contribute nearly 20% to GDP.

According to the World Bank, greater economic diversification, smarter management of public expenditure and a more equitable geographical distribution of resources would lower the poverty rate and make growth more inclusive.