ENHANCED SPECIALISATION IN COTTON AND RE-EXPORTS

Buoyed by a twofold increase in cotton production between 2014 and 2020, Benin has experienced substantial growth and maintained solid growth in 2020 despite the pandemic. Specialization in this commodity and re-exporting generates uncertainties, evidenced by a recent plateau in yields and the closure of borders by Nigeria in 2019 (as in 1984). Agriculture (30% of GDP and 40% of employment in 2021) remains predominant, although the emergence of an industrial base in building materials, textiles, and agribusiness is encouraged. A de facto monopoly of white gold, i.e., the purchase and ginning of cotton, continues to structure the sector, and textile factories opened in the autumn of 2022 in the Glo Djigbé industrial zone. The export of raw cashew nuts will be banned in 2024 to promote local processing.

Private investment (20% of GDP) is expected to remain stable, while public investment is expected to decline slightly (from 7% in 2020 to 5.5% in 2023) without falling back to its initial pre-pandemic level. Total investment has risen sharply, from 20% of GDP in 2016 to 27% in 2020, with household consumption's share in GDP falling by the same proportions. Since the pandemic and the Ukraine crisis, public investments, particularly in the electricity grid (thanks to U.S. cooperation) and freight transport, have driven growth based on a crossroads position. The port of Cotonou has been working on its competitiveness since 2017, supported by the expertise of the port of Antwerp. Eiffage won a EUR 160 million contract in August 2022 to extend and renovate the port by 2027. The improvement in Panamax volume capacity, logistics handling, and administrative efficiency is designed to meet regional competition by reducing costs and waiting times. Also, in a trade context, the China National Petroleum Corporation will commission the pipeline between Agadem (Niger) and Port Sémé in 2023. With works launched in October 2021, the African Development Bank is financing the development of the "cotton road" in the North between Djougou and Banikoara to the tune of USD 237 million, with completion expected in 2024.

Although relatively unaffected by imported inflation (rice prices remained stable in 2022), households have benefited from subsidies on agricultural inputs and fuels and tariff reductions. Having risen sharply in 2020, from 15% to 19% of GDP, public spending should undergo a lag due to a high level of investment.

The post-pandemic reduction in shortages, combined with food and energy inflation, aggravated by the depreciation of the CFA franc against the dollar, led to a severe deterioration in net imports in 2022. In a global slowdown scenario, the fall in commodity prices should lead to a recovery of this item in the medium term and improve the contribution of trade to growth.

RECENT PROGRESS IN MACROECONOMIC MANAGEMENT

The government's Action Plan since 2018, consisting of better macroeconomic management and budget transparency, enabled the country to obtain financing on the markets in 2019 and 2021. Cotonou also benefited in July 2022 from a USD 638 million 42-month IMF Extended Credit Facility to support anti-inflationary stabilization, the continuation of the Development Plan, and security spending. It should be noted, however, that the institution's loans represent only a tiny part of the country's debt, as the country benefits mainly from project loans from the World Bank. Public debt is divided equally between multilateral loans and external and domestic obligations. Its stock should stabilize thanks to continued fiscal consolidation and growth.

Resulting entirely from the imbalance in the balance of goods and services, the current account deficit will be financed by FDI, direct capital grants, project loans, and IMF disbursements. The financing requirement is expected to remain relatively the same in the medium term due to a decline in cotton prices.

INCREASED SECURITY TO COUNTER THE THREAT IN THE NORTH

Re-elected in 2021 for five years, President Patrice Talon aims to marginalize the political opposition by preventing elections and using the judiciary. The legislative elections of January 2023 mark an (authorized) return of the opposition to Parliament. The government is also trying to sweep the jihadist incursions in the North under the carpet. Coming regularly from neighboring Niger and Burkina, the terrorists have been carrying out increasing attacks since 2019, justifying calls for reinforced military support, notably during President Macron's visit in July 2022. In addition to the traditional alliance with France, Cotonou seeks to find complementary ties with China and potential investment providers from the Gulf states, as well as with Rwanda, through signing a security agreement on police and anti-terrorist training in September 2022.

The social context remains fragile in a country - albeit now middle-income - that is marked by inequalities both within the population (in 2020, the Gini coefficient was 0.47, and 49.6% of citizens lived on less than USD 1.9 per day) and between the North and the South (literacy and access to healthcare). With no oil or mineral resources, the country is capitalizing on its history to develop tourism. In 2022, the restitution of works of art looted during the colonial period, and the success of the Amazons of Dahomey abroad placed Benin in a positive light.