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Burkina Faso Economic Outlook
Recent macroeconomic and financial developments
Real GDP growth dropped to 3.2% in 2022 from 6.9% in 2021 because extractive activities fell 13.6% in 2022 despite growing 7.3% in 2021, following the closure of several mines for security reasons. Other factors in the economic slowdown were sociopolitical instability, military coups, a deteriorating security environment, and the effects of Russia’s invasion of Ukraine. Contributors to growth included agriculture (up 10.3% in 2022 after declining 12.3% in 2021) and the tertiary sector (up 6.6% in 2022 compared with 13.5% in 2021). On the demand side, public investment fell. Inflation jumped to 14.4% in 2022 due to higher imports of food products and oil. Private sector funding in the banking sector rose 16% in 2022. The budget deficit widened to 8.5% of GDP in 2022 from 6.3% in 2021 after public spending rose to 26.1% of GDP in 2022 from 25.6% in 2021 to address security and humanitarian challenges and provide oil subsidies. But tax revenue also increased, to 16.3% of GDP in 2022 from 15.2% in 2021. Public debt was an estimated 57.2% of GDP in 2022, up from 47.1% in 2021, suggesting moderate risk of overindebtedness. The current account balance turned to a deficit of 5.2% of GDP following a surplus of 0.4% in 2021 due to higher costs for food and energy imports and a weak rise in exports. The security context and resulting humanitarian crisis have exacerbated poverty in rural areas (estimated at 51.1% in 2019) as well as unemployment (57% of the population age 15 and older).
Outlook and risks
Real GDP is projected to grow 3.7% in 2023 and 3.9% in 2024, less than the 6% average for 2017–19, due to sociopolitical instability and the deteriorating security environment. The restrictive monetary policy of the Central Bank of west African States and improved food availability are expected to reduce inflation to 6.1% in 2023 and 3.7% in 2024. The budget deficit is projected to fall to 6.1% of GDP in 2023 and 5.2% in 2024, despite increased needs to address security and humanitarian challenges, thanks to higher tax revenue. Public debt is projected to remain sustainable, rising to 62% of GDP in 2023 and 2024 due to an increase in treasury bonds issued to fill the budget deficit. The current account deficit is projected to narrow to 3.1% of GDP in 2023 and 2.9% in 2024. Possible headwinds include a delay in re-establishing constitutional order, pronounced deterioration in the security situation, inflationary pressures, and lower prices for exported raw materials (gold and cotton).
Climate change issues and policy options
Burkina Faso remains highly vulnerable to climate change and aims to reduce its greenhouse gas emissions 29.4% by 2030. An estimated $636.9 million a year in climate finance is needed over 2021–30 for adaptation and mitigation, but only $284.5 million a year was mobilized over 2010–20, primarily from international partners. Both the private and banking sectors are involved in climate finance through the Intervention Fund for the Environment and through Coris Bank International (from the Green Climate Fund). Yet the private sector faces several obstacles, including low availability of resources dedicated to green investment, high cost of investment in climate change adaptation, and lack of awareness of how to access climate funds. The country should thus adopt green financial instruments such as green bonds to mobilize additional resources, adopt tax incentives to encourage green investment, and strengthen private capacity to design bankable ecological projects. The agricultural, forestry, and pastoral sectors, which accounted for 22% of GDP over 2011–22), and the mining sector (10.7%) are key to creating wealth. These sectors employ nearly 80% of the labor force. If sustainably exploited, natural capital, estimated at $50.8 billion in 2018, could contribute to climate finance and green growth.
