Economic Outline

Economic Indicators

Benin’s strong macroeconomic fundamentals and successful reforms have helped the country achieve robust economic growth despite recent external shocks such as the COVID-19 pandemic and the latest geopolitical tensions in Europe and the Middle East. Growth was estimated at 6.3% in 2024, with a forecast of 6.4% in 2025-2026 (data World Bank). The expansion of the construction and agro-food sectors, fueled by increased agricultural output and the development of the export-oriented GDIZ (Glo-Djigbé Industrial Zone), is expected to drive growth. The possible reopening of the border with Niger, improved customs relations with Nigeria, and the modernization of the Port of Cotonou will further support the services sector. On the demand side, strong investment from infrastructure projects and foreign capital in the GDIZ expansion will offset the end of the Niger-Benin pipeline investment and sustain growth. Increased export crop value-added and strong consumption, supported by lower inflation, will also contribute to growth.

Concerning public finances, Fitch Ratings estimated that the fiscal deficit narrowed to 3% of GDP in 2024, down from 5.5% in 2022 and 4.1% in 2023, reflecting higher revenue and lower current expenditure than budgeted, partly due to increased spending efficiency, underscoring the government's commitment to fiscal consolidation. Looking ahead, the fiscal deficit is expected to converge toward the 3% WAEMU target, as further increases in revenue will finance social expenditure. Deficit reduction and strong medium-term growth are expected to drive public debt down from 53.6% of GDP in 2024 to 51% in 2026. Benin’s proactive financing strategy includes a USD 500 million, 16-year Eurobond issued in January 2025, with USD 250 million used to buy back part of its 2032 Eurobond, reducing debt service costs and extending the average maturity of its external debt. Combined with similar measures in 2021 and 2024, this has helped reduce short- to medium-term amortizations, lowering Benin’s financial needs to 6.3% of GDP by 2026. According to the World Bank, inflation in Benin is expected to average 1.3%, supported by improved staple supply and a reduction in global food prices.

Sustained growth in Benin has not led to rapid poverty reduction. The elasticity between GDP per capita growth and poverty reduction is 0.26, compared to an average of 1.1 for Sub-Saharan Africa from 2018-2021. While growth has been driven by physical capital accumulation, largely due to ambitious public investment plans, human capital development remains low and below that of peer countries. The informal sector, which accounted for 86% of companies in 2023, contributes to low total factor productivity, hindering structural transformation.

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