In terms of risks, sustained food and ener- gy price volatility fueled by global geopo- BENIN Key conditions and litical tensions would negatively impact poor and vulnerable households, increas- challenges ing food insecurity and slowing poverty reduction. Extreme climate events would Table 1 2021 Prior to the pandemic, Benin experienced also cause damage and jeopardize agricul- Population, million 12.5 robust real GDP growth, averaging 6.4 tural output. Increased insecurity in the GDP, current US$ billion 18.5 percent between 2017-2019, due to a rela- northern part of the country could threaten GDP per capita, current US$ 1487.0 tively favorable external environment and the economic development of these rural a 19.2 International poverty rate ($1.9) commitment to macroeconomic stability. regions, push more households into a 51.3 The swift socio-economic response to fragility and trigger new security spend- Lower middle-income poverty rate ($3.2) a 79.3 COVID-19, combined with the continua- ing, reducing fiscal space. Finally, mone- Upper middle-income poverty rate ($5.5) Gini index a 37.8 tion of large public infrastructure projects tary policy tightening in advanced School enrollment, primary (% gross) b 114.2 supported growth throughout 2020, keep- economies would put pressure on Benin’s b 61.8 ing the real GDP deceleration among the external financing and debt sustainability. Life expectancy at birth, years lowest in SSA. The Government Action Total GHG Emissions (mtCO2e) 30.5 Plan (PAG) which initially covered the Source: WDI, Macro Poverty Outlook, and official data. period 2016-2021 was extended to 2026 a/ Most recent value (2018), 2011 PPPs. b/ WDI for School enrollment (2020); Life expectancy following the reelection of President Recent developments (2019). Talon in April 2021, and PAG2 maintains its focus on strengthening governance Real GDP growth is expected to have and on ambitious infrastructure invest- reached 6.6 percent in 2021, 3.8 percent Backed by a rebound of services and dy- ments (transport, logistics, agriculture, in per capita terms, driven by a strong namic construction sector, real GDP and tourism). rebound of the tertiary and construction Extending the recovery into the medium sectors. Private consumption (+3.9 per- growth is estimated to have reached 6.6 term will require continued structural re- cent) and total investment (+19.4 percent) percent in 2021, in-line with pre-COVID forms alleviating key constraints. First, benefited from easing cross border restric- trends. The fiscal deficit deteriorated fur- productivity growth in services and indus- tions and large public investment pro- ther as government extended its socio- try has been slow, due to low quality ed- jects. Inflation eased to 1.7 percent on av- ucation and skills mismatches. Second, the erage in 2021, notably on the back of economic response into 2021 and main- COVID-19 crisis highlighted a lack of re- lower energy prices until September 2021 tained capital expenditure levels, putting silience stemming from high gender dis- and a good, yet delayed, local subsistence pressure on PPG debt. Global inflation, parities and inadequate social safety nets. farming production. regional insecurity spreading through the Finally, even though fiscal consolidation The external current account deficit (CAD) northern border, and tightening global fi- efforts since 2016 enabled the use of coun- is estimated to have significantly deterio- tercyclical fiscal policy in response to the rated to -4.6 percent of GDP in 2021, after nancial conditions cloud the outlook. a temporary improvement to -1.7 percent COVID-19 crisis, domestic revenue mobi- lization remains structurally weak, limit- of GDP in 2020. In 2021, the resumption of ing fiscal space for productive spending. re-export activities following the end of the FIGURE 1 Benin / Budget balance and change in public and FIGURE 2 Benin / Actual and projected poverty rates and publicly guaranteed debt real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 10 100 900000 8 90 800000 6 80 700000 4 70 600000 2 60 500000 0 50 400000 -2 40 300000 30 -4 20 200000 -6 10 100000 -8 2011 2013 2015 2017 2019 2021 2023 0 0 2011 2013 2015 2017 2019 2021 2023 Change in debt (%GDP) Budget balance (%GDP) International poverty rate Lower middle-income pov. rate Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank Notes: see Table 2. MPO 1 Apr 22 border closure with Nigeria and the large stood at 44.2 percent, +12.8 ppts higher by regional bond emissions and conces- import demand required for infrastructure than in urban areas. Poverty reduction sional financing. projects fueled the deficit. The CAD was ($1.9 a day, 2011 PPP) based on the 2018 Swift response to alleviate the surge in mainly financed by external commercial EHCVM was estimated at 19.2 percent, food and fuel prices on households, will borrowing in 2021. and it slightly slowed down in 2021 (-0.5 keep the fiscal deficit (including grants) Fiscal policy remained expansionary for a percent y-o-y) versus 2020, as extreme high at 5.5 percent of GDP in 2022. A rev- second consecutive year with the fiscal poor represented 18.3 percent of the popu- enue-based fiscal consolidation is expected deficit (incl. grants) up from 4.7 percent of lation end-2021. to narrow the fiscal deficit to 4.4 percent the GDP in 2020, to 5.8 percent of GDP in 2023 and reach the WAEMU target of 3 in 2021. The increase was mostly driven percent of GDP by 2025. As a result, PPG by capital expenditure and the extension debt is expected to peak at 52.4 percent end of COVID related current spending. Rev- Outlook 2023 before gradually decreasing. enues, excluding grants, increased from WAEMU reserves are expected to fall to 12.7 to 13.4 percent of GDP in 2021, due The ongoing war in Ukraine and its around 5.5 months of imports in 2022 to higher customs revenues and resilient repercussions in fuel and food prices, are and 5.3 months in 2023 and 2024, re- tax revenues. Public and publicly guaran- expected to negatively weigh on the short flecting faster growth in imports and a teed (PPG) debt increased to 51.7 percent term outlook. Real GDP growth is expect- reduction in net capital inflows (as a in 2021 (+9.2 ppt compared to 2019), with ed to decelerate to 5.9 percent in 2022, be- percent of GDP), as the environment for Eurobond issuances representing the bulk fore stabilizing at around 6 percent with Eurobond issuances remains uncertain. of 2021’s financing. fiscal consolidation muting the rebound. Growth-friendly fiscal consolidation and Benin’s monetary and exchange rate poli- A gradual shift from public to private the implementation of structural reforms cies are managed by the Central Bank of investments in the medium term is ex- are key to maintaining reserves at an West African States (BCEAO), which main- pected to drive growth on the demand optimal level. tains a fixed peg between the CFA Franc side, underpinned by the implementation Poverty reduction is expected to gradually and the Euro. Its reserves reached 5.8 of the PAG 2. revert to its pre-crisis downward trend as months of imports of goods and services Inflation is projected to sharply increase to the economy rebounds, but recent increas- in 2021, as a result of increased exports, 3.9 percent in 2022, and gradually abate es in food and energy prices could slow the August 2021 SDR allocation, and port- as the impact of the ongoing conflict in its pace. On the back of improved employ- folio inflows linked to Eurobond issuances Ukraine recedes. ment indicators, and social protection pro- in the region. The current account deficit (including grams, the $1.9/day PPP poverty head- Poverty and vulnerability remain high. grants) is expected to widen to 6 percent of count rate is expected to decrease to 18 The poverty rate based on the national GDP in 2022, as import prices rise driven percent in 2022 (-0.3 percent y-o-y), and to poverty line was 38.5 percent in 2019, with by imports from construction and energy 17.4 percent by 2024. strong spatial disparities: rural poverty sectors. The CAD will be mainly financed TABLE 2 Benin / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 6.9 3.8 6.6 5.9 6.1 6.0 Private Consumption 3.5 3.0 3.9 3.5 3.6 4.3 Government Consumption 5.8 19.6 8.5 9.2 -2.0 3.0 Gross Fixed Capital Investment 8.4 -10.9 11.6 11.0 15.4 10.2 Exports, Goods and Services -1.6 -15.4 23.8 14.0 8.3 5.8 Imports, Goods and Services -6.1 -21.5 19.8 13.4 6.9 4.6 Real GDP growth, at constant factor prices 6.9 3.8 6.6 5.9 6.1 6.0 Agriculture 7.2 1.8 3.2 5.0 5.4 5.5 Industry 6.2 5.2 9.4 8.4 9.5 10.1 Services 7.1 4.5 7.4 4.7 3.9 2.9 Inflation (Consumer Price Index) -0.9 3.0 1.7 3.9 2.5 2.0 Current Account Balance (% of GDP) -4.0 -1.7 -4.6 -6.0 -5.3 -4.8 Net Foreign Direct Investment (% of GDP) 1.3 0.5 1.4 1.5 1.8 2.2 Fiscal Balance (% of GDP) -0.5 -4.7 -5.8 -5.5 -4.3 -3.1 Debt (% of GDP) 42.5 46.1 51.7 52.2 52.3 51.2 Primary Balance (% of GDP) 1.1 -2.7 -3.6 -3.7 -2.6 -1.6 a,b International poverty rate ($1.9 in 2011 PPP) 18.8 18.7 18.3 18.0 17.7 17.4 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 50.8 50.7 50.2 49.8 49.5 49.1 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 78.6 78.4 77.7 77.1 76.5 75.9 GHG emissions growth (mtCO2e) 1.6 2.3 4.2 3.6 3.3 3.5 Energy related GHG emissions (% of total) 35.2 36.0 38.0 39.4 40.6 41.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2011-EMICOV, 2015-EMICOV, and 2018-EHCVM.Actual data: 2018. Nowcast: 2019-2021. Forecasts are from 2022 to 2024. b/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 2 Apr 22