Ekonomska istraživanja
Burkina Faso

Burkina Faso

Population 19.8 million
GDP 716 US$
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Synthesis

major macro economic indicators

  2017 2018 2019 (e) 2020 (f)
GDP growth (%) 6.3 6.8 6.0 6.0
Inflation (yearly average, %) 0.4 2.0 1.1 1.4
Budget balance * (% GDP) -7.8 -4.9 -5.0 -3.1
Current account balance * (% GDP) -7.3 -5.8 -6.1 -5.3
Public debt (% GDP) 38.4 42.9 42.5 42.2

(e): Estimate. (f): Forecast. *Grants included.

STRENGTHS

  • Major producer of gold (6th in Africa in 2018) and cotton (2nd in Africa in 2018)
  • Member of the West African Economic and Monetary Union (which ensures the stability of the CFA franc, fixed parity against the euro)
  • Support from the international financial community (one of the first countries to benefit from the HIPC initiative)

WEAKNESSES

  • Economy highly exposed to weather-related hazards
  • Vulnerable to changes in cotton and gold prices
  • Heavily dependent on external aid
  • Weak electrical infrastructure
  • Population pressure, very high poverty rates, very low human development index and critical food insecurity
  • Significant informal sector and failing business environment (ranked 151st in the Doing Business 2020 index)
  • Presence of armed Islamist groups (foreign and domestic), particularly in the north and east of the country

Risk assessment

An under-diversified economy with investment-driven growth

Growth is expected to remain dynamic in 2020. The gold sector is an economic driver for the country (12% of GDP and more than 65% of exports in 2018), thanks to massive investments by foreign companies (Semafo and Endeavour, in particular). It is set to continue to expand owing to the expected increase in gold prices and as commercial production comes onstream at two new mines in 2020. However, it could suffer from the fragile security environment (frequent Jihadist attacks and kidnappings from mines). Cotton production is expected to increase, benefiting from public investment under the National Economic and Social Development Plan (PNDES), which is aimed at increasing agro-sylvo-pastoral productivity. Nevertheless, food insecurity and security tensions may affect agricultural output. The PNDES also seeks to develop the manufacturing sector, in particular agri-food and textiles, with the aim of moving the country's economy, which is mainly production-oriented, towards the processing of agricultural raw materials, with a target of 25% for processing by 2020. To this end, the artisanal cotton processing plant in Bobo-Dioulasso is expected to open in 2020, thanks to the support of a public-private partnership (PPP). In addition, improved relations with China since Burkina Faso severed its diplomatic ties with Taiwan in 2018 should encourage investment in infrastructure, boosting sectors such as energy and transport. In January 2020, for example, China Harbour Engineering is scheduled to start building a 300 km motorway linking the capital to the country's second largest city, Bobo-Dioulasso.

Inflation will be stable thanks to WAEMU membership, which, combined with rapid population growth and urbanisation, will fuel a vibrant domestic market (private consumption accounts for more than half of GDP), supporting the service sector.

 

Determination to consolidate the public accounts in the face of cyclical risks

The budget deficit is expected to narrow further in 2020 in order to move closer to WAEMU convergence criteria, which set a maximum of 3%. The IMF granted the country a three-year Extended Credit Facility (ECF) of €135 million in March 2018. In this context, fiscal policy is expected to focus on increasing revenues, through the modernisation of tax and customs administrations, and reducing spending (VAT exemptions to be scrapped). However, government spending is high (27% of GDP in 2019), as the fight against terrorism, the social crisis and the PNDES generate significant current and investment expenditures, jeopardising the country’s compliance with budgetary commitments.

The small trade surplus is expected to grow (0.7% in 2018) as increased gold and cotton production and higher gold prices boost export earnings. Imports (mainly capital goods and oil) should remain stable. The services deficit (6.0% of GDP) is expected to stay at a broadly similar level. Remittances from expatriates (3.5% of GDP) will be offset as foreign companies repatriate profits. The current account deficit is therefore expected to shrink, with financing provided by loans from international organisations and issues on the regional market. An improved current account and increased grants should pave the way for external public debt (22% of GDP) to decline slightly.

 

A fragile security context and a tense social situation

Security will remain the main challenge facing President Kaboré and his government in 2020. In 2019, the security situation deteriorated rapidly, with an upsurge in Islamist terrorist attacks, leading to massive population displacements (500,000 displaced persons, according to the UN). International observers now fear that the State could fail, as the government has lost control of nearly a third of the territory to armed groups. Difficulties in financing the G5 Sahel force (of the USD 414 million pledged, only a quarter has actually been disbursed) have prevented that organisation from fulfilling its mission of securing borders and fighting terrorism. In mid-September, ECOWAS pledged to provide USD 1 billion to restore the force’s strength. In addition, the G7 summit in Biarritz saw the creation of a “Partnership for Security and Stability in the Sahel” (P3S), the terms of which have yet to be defined.

Moreover, since its election in 2015, the central government has faced strong internal opposition, as a portion of the population perceives it to be incapable of dealing with the country's many problems. The security emergency also raises questions about compliance with the electoral calendar. A constitutional referendum, which included a 10-year limit on holding the presidency, and which was initially scheduled to be held in March 2019, was postponed. Presidential elections are slated for the end of 2020.

 

 

Last update: February 2020

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