Created in January 1994, the WAEMU economic region currently has eight countries representing issuers on the Government Securities Market. These are Togo, Senegal, Niger, Mali, Guinea-Bissau, Côte d’Ivoire, Burkina Faso, and Benin.
- The West African Economic and Monetary Union (WAEMU) is one of sub-Saharan Africa’s most dynamic economic regions.
- According to the Central Bank of West African States (BCEAO), growth should accelerate in the WAEMU economic region in the medium term.
- Fiscal consolidation in the West African Economic and Monetary Union should begin in 2023 when the budget deficit would represent 4.9 per cent of GDP.
The West African Economic and Monetary Union (WAEMU) is one of sub-Saharan Africa’s most dynamic economic regions. The outstanding performance of the member states’ economies drives this positive economic outlook. Created in January 1994, the WAEMU economic region currently has eight countries representing issuers on the Government Securities Market. These are Togo, Senegal, Niger, Mali, Guinea-Bissau, Côte d’Ivoire, Burkina Faso, and Benin.
Trade flows mainly depend on commodities like cocoa, cotton, gold, uranium and phosphates. The economic region has the potential to expand regional trade integration and growth. The West Africa CFA Franc (XOF) common currency and the absence of tariff barriers are crucial in this quest. The common currency eliminates foreign exchange risks in the economic region. However, the inflow of international investments remains low, probably due to a lack of infrastructure and strong institutions.
The region relies heavily on the public sector. This can be addressed by improving the competitiveness of the WAEMU economic region. This involves unlocking private-sector-led growth, which remains essential for durable economic progress and sustainable public finances.
Efficient recovery of the WAEMU economic region in 2021
The WAEMU economic region’s real GDP growth rate for 2021 was 6 per cent, up 4.2 points compared to 2020. The zone returned to its pre-pandemic growth trajectory in a regional context. The region, in recent years, has suffered from persistent security risks due to the terrorist threat and the uncertainties surrounding the global economic outlook.
The regional economic block has taken measures to accelerate the reforms necessary for macroeconomic stability and improve the business climate. This helps to attract more private sector investors, particularly in the agro-food and manufacturing industries.
inflation, debt, and budgetary deficits
Nevertheless, a rise in consumer prices dampened the recovery in the WAEMU economic region. The average annual inflation rate stood at 3.6 per cent in 2021 after 2.1 per cent in the previous year. This rise in consumer prices comes from high food costs following a disappointing 2021/2022 agricultural campaign. The surging prices of the leading imported products in connection with the recovery of the world economy also remain a challenge.
The members’ financial operations in 2021 took place amidst implementing the recovery plans and continuing the investments in the national development programs (NDPs). Thus, the execution of the budgets of the WAEMU Member States ended in 2021 with an increase in the overall budget deficit, which represented 5.5 compared to 5.6 per cent of GDP in 2020.
In connection with these developments, the Union’s debt ratio stood at 53.3 per cent in 2021 against 50.1 per cent a year earlier, as per the WAEMU Commission’s multilateral surveillance report of December 2021.
As for the foreign trade of member states, they generated an overall surplus of the balance of payments of $771.7 million (475.6 billion XOF) in 2021, after a surplus of $25.6 million (15.8 billion XOF) in 2020. The consolidation of the positive balance of payments would be due to the laudable performance of the financial account, the surplus of which should more than offset the deterioration of the current account deficit.
Medium-term economic growth for WAEMU
According to the Central Bank of West African States (BCEAO), growth should accelerate in the WAEMU economic region in the medium term. The increased production in the tertiary and secondary sectors remains crucial. These sectors should benefit from controlling the current health crisis in the Union and the continued implementation of the NDPs.
Growth in the Union is expected to drop from 6 per cent in 2021 to 5.9 per cent in 2022 before settling at 7.2 per cent in 2023. The contribution to growth from the tertiary sector should stand at 3.5 per cent in 2023, up by 0.3 points compared to 2022. The contribution of the secondary sector should grow by 0.9 points between the two years to settle at 2.6 per cent in 2023.
The inflation rate reached 6.2 per cent in 2022. Consequently, the WAEMU economic region faced an unprecedented inflationary spiral. The spiral defied government initiatives and BCEAO rate hikes. These tensions should ease from 2023 when the projected inflation rate stands at 3.6 per cent.
The downward forecast would be achieved through the emergency measures taken by member countries. These measures have helped combat rising prices. The expected interventions under the National Response Plans (NRP) approved by member countries, and their partners also remain significant.
The acceleration of food prices contributed 6.4 percentage points to overall inflation. Inflation will thus ease in 2023. This is in relation to the expected increase in production for the next 2022/2023 agricultural campaign. Moreover, the anticipated easing of world prices of agricultural products, foodstuffs and oil imported by the WAEMU countries will also prove significant.
Regarding public finances, the budget deficit should improve in the WAEMU economic region in 2023. The improvement will come from implementing reforms to mobilise tax revenue and rationalise public spending. The Union’s overall budget deficit to GDP would drop from 5.5 in 2021 to 6.0 per cent in 2022.
Fiscal consolidation in the Union should begin in 2023, when the budget deficit would represent 4.9 per cent of GDP. In connection with this improvement in the budget deficit, the debt ratio of the Union would stand at 50.9 per cent in 2023, down by 2.1 compared to 2022.
Foreign trade in WAEMU
WAEMU’s foreign trade would gradually consolidate the surplus in the overall balance of payments. This represents an overall increase from $771.8 million (475.7 billion XOF) in 2021 to $406 million (250.2 billion XOF) in 2022 before reaching XOF 1 017.6 billion in 2023.
This consolidation of the surplus of the overall balance of the payment balances would be attributable to the continuous improvement of the positive balance of the financial account combined with a reduction of the deficit of the current account. It represents 4.7 per cent of GDP in 2023 after 6.8 per cent and 5.8 per cent, respectively, in 2022 and 2021.
This reduction in the current account deficit in 2023 would occur in a context marked by a significant increase in the volume of oil exports and a slowdown in imports of services as well as capital and intermediate goods from Niger and Senegal, which would be in the oil and gas production phase.