THE ECONOMIC IMPACT OF POLITICAL AND SECURITY INSTABILITY MITIGATES GROWTH

The economy will enjoy higher growth than in 2022, driven in particular by an increase in gold and cotton exports. Gold production (which accounted for 78% of exports in 2021) is expected to increase due to ongoing mining projects and the award of new licenses by the government, in particular to the Russian company Norgold. Favorable weather conditions and lower fertilizer prices will support the robustness of the agricultural sector. Finally, the services sector will continue its recovery, mainly through ICT and financial services. However, growth will remain moderated by the risks posed by political and security instability. Indeed, it will continue to affect private investment and FDI inflows.

Moreover, despite an expected drop in the average price of oil, the latter will remain high and continue to weigh on imports. As a result, inflation will remain high, particularly for food and oil. Further monetary tightening is expected in 2023, helping to contain inflation and investment.

TWIN DEFICITS ARE STILL LARGE

The budget deficit will remain large and above the WAEMU community norm (3% of GDP). Defense and security expenditures will remain very high. Indeed, due to the persistence of the terrorist threat and the coup d'état of September 2022, the 2023 budget forecast is mainly focused on strengthening security, notably by providing for the deployment of 3,000 additional soldiers on the territory and the purchase of new military equipment. As the security issue goes hand in hand with humanitarian issues, social expenditure to deal with it will remain very substantial. Finally, although inflation will decrease, its durably high level will lead to the maintenance of financial aid measures for households, farmers, and businesses. Bilateral and multilateral loans, international grants, and recourse to the regional bond market will finance the deficit.

The current account will remain in deficit, but less so due to strong exports, which will continue to support the trade surplus. However, it will continue to suffer from the endurably high value of imports and profit repatriation by foreign companies, mainly in the mining sector.

TWO MILITARY COUPS, CONSEQUENCES OF AN INCREASED SECURITY RISK

Since 2015, insecurity in the Sahel, linked to the activity of armed jihadist groups affiliated with Al-Qaeda and the Islamic State, has caused more than 2,000 deaths and 2 million displaced persons, according to the UN. After being concentrated in the north, regular attacks have been perpetuated throughout the country, 40% of whose territory is controlled by jihadist groups. After a first military coup in January 2022 that led to the overthrow of President Kaboré by the military junta of the Patriotic Movement for Safeguard and Restoration (MPSR), justified by the government's inability to contain the jihadist insurgency, Lieutenant-Colonel Damiba was, in turn, deposed in September on the same grounds as his predecessor. The MPSR and the country have since been led by Captain Traoré, appointed President of the Transition, until the next elections, expected in July 2024. The coup was condemned by the Economic Community of West African States (ECOWAS), and the armed forces are themselves divided: Traoré, as well as several members of the junta who assisted him in the coup, supported Damiba in his January 2022 operation, while other officers did not participate in either coup. In this context, political instability will still threaten in 2023, driven by a vast security issue.

The country will continue to rely on international cooperation in its fight against terrorism by participating in the G5 Sahel force alongside Chad, Mauritania, and Niger (Mali having left in May 2022). However, the deterioration of relations with Paris, with the temptation to exploit anti-French sentiment, in parallel with increased diplomatic and military cooperation with Russia, darkens the picture. Such a rapprochement with Russia could damage the country's relations with Western countries, whose military and humanitarian support remains very substantial.