What is Socio-economic and political update on Benin

Introduction

Economic Outlook

Benin has demonstrated robust economic performance in recent years, with promising signs of economic transformation. The country’s GDP growth reached 7.2% in 2021 and 6% in 2022, showing a strong recovery from the COVID-19 pandemic. Looking ahead, real GDP growth is forecast to remain above 6% in the medium to long term, making Benin one of the best-performing economies in West Africa.

Key drivers of this growth include:

Business-friendly policies and institutional improvements

Structural reforms

Infrastructure investments

Development of agroindustry and natural resource transformation

Expansion of transit trade through the Port of Cotonou

Growing tourism sector

Cotton production (a major source of foreign currency)

However, some challenges persist:

Recent border closures with Niger and sanctions related to the neighboring military coup are expected to negatively impact Benin’s economy in 2023.

Weather-related shocks have led to a drop in cotton production.

Cotton production is increasingly exposed to climate change risks.

Fiscal Situation

Benin’s public finances have shown signs of strain in recent years:

The overall fiscal deficit increased to 5.7% of GDP in 2021 and 5.5% in 2022.

Public debt stock rose from 46% of GDP in 2020 to 54% in 2022.

The government is working towards fiscal consolidation:

The 2025 budget targets compliance with the West African Economic and Monetary Union (WAEMU) fiscal deficit norm of 3% of GDP.

Enhanced domestic revenue mobilization is a key requirement of the IMF program.

Assuming successful fiscal consolidation, the public debt stock is expected to moderate to around 52% of GDP by 2025.

Political Situation

Benin’s political landscape has undergone significant changes in recent years:

President Patrice Talon, elected in 2016 and re-elected in 2021, has implemented a comprehensive reform agenda.

However, concerns have been raised about democratic backsliding and the concentration of power in the president’s hands.

The country’s democratic system has become fragile due to reforms to the party system and a new electoral code adopted in 2018.

Benin experienced deadly electoral violence in 2019 and 2021.

Recent developments

In January 2023, opposition members were allowed to participate in legislative elections for the first time since 2015.

The opposition party Les Démocrates now holds 28 seats in parliament, providing a platform for criticizing the government and exercising control over its actions.

Social and Security Challenges

Benin faces several social and security challenges:

About 85% of the workforce operates in the informal economy, and over half of the population lives below the poverty line of $3.20 per day.

The country ranks low on the Human Development Index, placing 166th out of 191 countries in 2021.

Security threats from jihadist groups at Benin’s northern border are increasing.

To address these issues, the government has implemented several initiatives:

A new social protection strategy for 2024-2028 with a budget of over CFA709 billion ($1.13 billion).

The ARCH project (Insurance for Strengthening Human Capital) to provide essential social services and health coverage to vulnerable groups.

The ACCESS project to improve infrastructure and foster social cohesion in fragile areas.

Increased security measures and government presence in border regions.

Conclusion

Benin shows promising economic growth and reform efforts, it continues to face significant challenges in terms of political stability, social development, and security. The government’s ability to address these issues while maintaining economic momentum will be crucial for the country’s future development.