Benin's economic growth will accelerate over the next two yearsalongside a recovery in the Nigerian economy (with which Benin hasstrong linkages) and on the back of rising public and private sectorinvestment. However, we do not believe that growth will reach levelsaimed for by the government given that the business environmentreforms will not be sufficient to attract the kind of private investmentthat the government's development plan requires.
Opposition from sections of the electorate and from within the nationalassembly to President Patrice Talon's reform programme will forcehim to water down his agenda or at least delay its implementation.As a result, the business environment will not improve as quickly asthe president hopes and this will lead to lower foreign private sectorinvestment and weaker economic growth than he is targeting.
Inflation in Benin will remain low and stable over the next 10 years dueto the country's membership of the Union Economique et MonétaireOuest Africaine currency bloc. The West African franc's peg to theeuro will ensure broad currency stability and will limit import-pricepressures.
Benin's budget deficit will narrow in the years ahead due to continuedimprovement in the government's expenditure and revenue collectionprocesses. Government debt as a share of GDP will gradually riseover the next decade as persistent fiscal deficits drive public sectorfinancing needs.
Benin's current account deficit will narrow over the next 10 years onthe back of increased output from the country's cotton sector andgreater access to regional markets as tariffs in West Africa becomeincreasingly liberalised. Benin's external position will be furtherbuoyed as external debt remains on a sustainable trajectory andcurrency risks remain limited.
Benin's political landscape will remain one of the most stable andopen in West Africa in the years ahead, benefitting from a free pressand strong opposition. Nevertheless, the country faces challengesin the long term, such as a spillover of violence from piracy andterrorist activity in the region.