Economic and poverty developments and outlook
- According to the report, the economy grew by 3.2% in 2023 despite a security crisis and inflation fell to 0.7% as local product prices declined. Following a year of sluggish economic performance (1.8% in 2022), GDP growth rebounded slightly in 2023 to 3.2% (corresponding to GDP per capita growth of 0.6%) but the security crisis continued to weigh on the economy. With a successful agricultural season, inflation trended down in the first half of 2023 and turned negative from May to October 2023. Over the year, average inflation was 0.7%.
- The security crisis continues to impact growth and political stability. Following two coups d’état in 2022, recorded security related deaths doubled to 8,494 in 2023. Insecurity has disrupted industrial mining for gold, which accounts for 77% of exports, 16% of GDP, and 22% of government revenues.
- After increasing between 2018/19 and 2021/22, poverty is expected to be stable thanks to low inflation, but the humanitarian situation remains critical. Poverty increased 1.8 percentage points between 2018/19 and 2021/22, reaching 43.2% in 2021/22, and is estimated to have remained roughly constant since. The humanitarian situation remains very critical, with around 2 million internally displaced persons, in addition to an estimated 2.3 million facing severe food insecurity as of December 2023.
- The outlook remains subject to uncertainty around regional dynamics and downside risks stemming from insecurity, political instability, climatic shocks, and terms of trade shocks.
Maintaining reform momentum on social assistance
- Government spending on social assistance represents around 2.6% of GDP and would theoretically be sufficient to almost halve the poverty gap. Social assistance expenditure has risen over the last 15 years, from 0.3% of GDP in 2005 and exceeds the average of the sub-Saharan countries. If interventions were perfectly targeted to the poor, social assistance spending could theoretically almost halve the poverty gap, which is estimated at around 6% of GDP in 2021.
- However, the impact of this high level of expenditure is hampered by the system’s inefficiency, including its fragmentation.
- Overall social assistance does not primarily benefit the poor with more than half of beneficiaries of all interventions being non-poor.
- In 2023, the government gradually suspended interventions that included monetary transfers, despite them being the most progressive social assistance spending in Burkina Faso.
The authors recommend policy options to strengthen macro-fiscal sustainability and improve social assistance. The report therefore indicates that the government could (i) enhance the efficiency of revenue mobilization, (ii) improve the efficiency of public expenditure, and (iii) mitigate the economic impacts of the ECOWAS withdrawal. Two complementary options are available: (i) improve poverty-targeting and (ii) improve the efficiency of social assistance spending.
Some positives are worth mentioning: inflation, which is particularly hurting the poor, is expected to remain low, assuming an orderly ECOWAS withdrawal. In addition, on-going reforms such as the further deployment and use of the social registry and the operationalization of the national social assistance flagship program can help more effectively reduce poverty.