Macroeconomic Forecast Benin

March 2004 | Macroeconomic Forecasts

Ongoing dependence on exports of the key commodity, cotton, means the economy is vulnerable to price shocks. At present, the cotton outlook is improving, with rising prices fuelling an expected 6.1% growth in GDP and 9% growth in exports this year. However, the longer-term downwards trend (since 1980) has undermined national income, leading to high levels of external debt. As a member of the West African Economic and Monetary Union, the economy benefits from the central bank?s stable and credible monetary policy. Yet with the common Communauté Financière Africaine franc pegged to the euro, currency strength poses a downside risk to demand for exports. Underdevelopment of infrastructure and human capital constrains the prospects for investment and diversification, despite prudent fiscal policy.

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