Africa > West Africa > Benin > Benin Outlook for 2016-17

Benin: Benin Outlook for 2016-17

2016/05/28

Benin Outlook for 2015-17

 The president-elect, Patrice Talon, secured a clear victory in the March 2016 election, which will lend credibility to the new administration. However, political instability risks will persist in 2016 as Mr Talon cobbles together a ruling coalition. Real GDP growth will average 4.7% in 2016-17, on the back of rising port activity. However, inadequate power supplies, slow progress on economic reforms and the economic slowdown in Nigeria, a key trade partner, will prevent faster growth.

Early results show presidential victory for Patrice Talon

Event

Lionel Zinsou, Benin's current prime minister, conceded the presidential run-off election to his opponent, Patrice Talon, during the night of March 20th, less than 12 hours after the polls closed.

Analysis

Unofficial results released on March 21st by the elections authority, the Commission électorale nationale autonome (CENA), put Mr Talon solidly in the lead with 65.4% of the vote, with an estimated voter turnout also of 65%. Even prior to CENA's announcement, Mr Zinsou told international news agencies that Mr Talon had pulled ahead by a "significant" distance, making his electoral victory "certain". Mr Talon is set to enter office on a landslide victory, signalling an important shift away from traditional party politics in Benin.

Voters were primarily concerned with candidates' plans to reinvigorate the economy and make progress on efforts to create jobs, boost living standards and improve the quality of public services, primarily health and education. The election results reveal voters' frustration with the entrenched political elite, and despite his strong track record in international finance and economics, Mr Zinsou probably suffered from his association with the current president, Boni Yayi. Public support for Mr Yayi and the ruling Forces cauris pour un Bénin émergent (FCBE) has waned in recent years—reflected by the FCBE's weak performance in the April 2015 legislative election—owing in part to slow progress towards the administration's economic and social goals, as well as frustration with a recent series of public corruption scandals.

In light of this, Mr Talon's separation from party politics (he ran as an independent) and lack of experience in public office appear to have bolstered his credibility with voters. Mr Talon was a key ally of the administration in the past, but spent several years exiled in France following a dramatic falling-out with Mr Yayi in 2012. Mr Talon managed to win support from a large number of political parties and candidates that were defeated in the first round of the race, in part given his position as the anti-regime candidate. Nonetheless, Mr Talon will quickly need to form a coherent government coalition in order to respond to voters' clear demands for progress on economic growth.

Impact on the forecast

Mr Talon's overwhelming victory will lend credibility, and therefore stability, to the next administration. However, we will reflect downside risks to political stability in our next forecast, as the president-elect works to form a coalition government without the support of a coherent party base.

Economic Overview

Real GDP growth is projected at 5.5 to 6% in 2016. Growth in 2012 was 5%, and steadily increased to 7% percent in 2013, before decelerating in 2014 to 6.5% and then to back to 5% in 2015, mainly due to a slowdown of re-export activities to Nigeria and a drop in agriculture production.

Increasing cotton production, which reached approximately 400,000 tons in 2014 and 2015 (up from 240,000 tons in 2012 and 2013), strong activity at the Port of Cotonou, and rising telecommunications and transport sector activity have supported this improved performance. In spite of the slight decline in economic activities in recent months, Benin GDP’s growth was one of the best among the West African Economic and Monetary Union (WAEMU) countries in 2015. Inflation is estimated at -0.5% for 2015 and is projected to remain under 3% in 2016. This has typically remained below the WAEMU target of 3%, and stems from the fact that Benin sources over 85% of its petroleum products from Nigeria through unofficial channels. The country’s fiscal deficit, which increased considerably in 2015 as the result of higher public investments and lower than targeted public revenues, should remain under control at 6% in 2016.

Social Context

Poverty remains widespread in Benin, with national poverty rates of 37.5% in 2006, 35% in 2009 and 36% in 2011. Female-headed households experience lower levels of poverty (28% compared to 38% for male-headed households), though women remain more vulnerable and continue to suffer from a lack of economic opportunities. Women are also underrepresented in high-level decision making positions. The education and health sectors continue to represent a significant share of annual public expenditure (on average 23% of public expenditure is allocated to education and 7% to the health sector). Significant efforts are needed to ensure more equity in the geographical distribution of resources and greater effectiveness and efficiency in the management of these two sectors.

Development Challenges

Benin is vulnerable to exogenous shocks, primarily: adverse weather conditions, terms of trade shocks (cotton and oil prices), and developments in Nigeria. The outlook for 2016 is clouded by the impact of declining global oil prices, which will be felt largely indirectly through Nigeria, as reduced growth there will affect Benin. Benin is also sensitive to Nigeria’s trade policy decisions, as 80% of Benin’s imports are destined there via informal cross-border trade. Other vulnerability risks to Benin include the contingent liabilities that comes with the government’s continuing control of the cotton sector.

The government needs to accelerate reforms in order to access the $12 billion pledges made during the June 2014 Consultative Group in Paris. To guard against debt distress, financing plans for scaling up investments will need to be highly concessional. The country also needs a regulatory framework to attract public-private partnerships. The priority axes of reforms identified by the 2015 public expenditure management and financial assessment report include improvement of internal revenue collection, restructuring the financial control system, improving the governance for autonomous public institutions, and enhancing the accounting and budget information systems.

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