Author (s): African Development Bank Group (AfDB)
The African Development Bank Group is a development and finance institution which focuses on sustainable economic development, social progress, and poverty reduction.
Economic performance and outlook
Real GDP growth averaged 6.5% between 2014 and 2015 before slowing to 5.8% in 2016. The decline continued in 2017, to an estimated 5.5%, likely because of the primary sector’s underperformance (38% of GDP) due to a poor agricultural season. In the medium term, the economic outlook remains positive; real GDP growth is projected to be 5% in 2018 and 4.9% in 2019. However, the economy still faces the risk of a downturn, particularly given the fragility of the security situation.
The budget deficit stood at 3.1% of GDP in 2016 and was estimated at 3.5% in 2017. Tax revenues as a share of GDP increased 0.3% percentage points, due to ongoing efforts to modernize the tax administration and broaden the tax base. Inflation in 2017 was estimated at 2%, up from –1.8% in 2016, below the West African Economic and Monetary Union (WAEMU) ceiling of 3%. The current account deficit was an estimated 7% of GDP in 2017, down from 7.1% in 2016, and is expected to decline to 5.7% in 2018 due to improvements in the terms of trade, which are likely to improve from –6.4% in 2017 to –0.1% in 2018. Public debt increased slightly to 31.8% of GDP in 2017, largely a result of an increase in domestic debt from 7% in 2015 to 15% in 2017. The most recent debt sustainability analysis in July 2017 indicated a moderate risk of debt distress.
Mobilization of tax, customs, and land-related revenues continues to be at the core of public finance reforms to ensure the financing of increasing development needs. The government’s commitment to make fiscal decentralization a key priority entails carrying out regional development projects as part of government-region contracts, supported by a transfer of necessary skills and resources, as well as greater regional accountability. Resource transfers accounted for 22.9% of budget revenues in 2016 and were estimated at 23.4% in 2017.
Despite economic recovery and efforts to gradually restore the government’s ability to provide basic social services, three major challenges remain. First is lasting improvement in the security situation, a key factor in development. Second is private-sector development, which requires improving governance in public management by better mobilizing resources for growing investment needs, boosting the quality of public investment, distributing resources equitably across the country’s regions and priority sectors, and achieving transparency in public procurement. Third is generating strong and inclusive economic growth, given the constraints created by the structural fragility of the economy and strong population growth of 3.6%.
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