Benin

Growth remains strong, supported by investment

In 2025, the economy will continue to grow strongly. The industrial sector (20% of GDP in 2024) will benefit from the strengthening of agro-industrial capacities, particularly in the textile sector, made possible by the expansion of the Glo-Djigbé Industrial Zone (GDIZ). Public investment, as part of the 2021-26 National Development Plan (PAG II), is supporting construction. Projects include the modernisation of the port of Cotonou and the development of infrastructure (transport, electricity, sanitation, information technology). These investments are also benefiting the service sector (50% of GDP), particularly tourism, telecommunications, and trade. Good performance is expected in agriculture (30% of GDP) and fisheries, supported by fertiliser subsidies and private investment in the cotton, cashew, fishing, and aquaculture sectors. Cross-border trade with Niger has been gradually resuming since August 2024, including transit trade, particularly in oil. However, persistent insecurity in the north of the country, where the main cotton-producing areas are concentrated, and delays in the full reopening of the border with neighbouring Niger could slow growth.

Public consumption, already supported by security and social imperatives, will gain further momentum in the run-up to the elections. Private consumption will continue to grow, benefiting from controlled inflation. In 2025, inflation will remain within the target range of between 1% and 3% set by the Bank of West African States. The country will benefit from lower global grain prices. Already, the decline in international oil prices is leading to a decrease in the cost of illicit fuel from Nigeria. In addition, the appreciation of the CFA franc against the US dollar, due to the strengthening of the euro in the uncertain financial market context and the loss of confidence in US economic policy, will help reduce imported inflation.

Consolidating public accounts and reducing the current account deficit

The implementation of PAG II is supported by two joint IMF programs expiring in January 2026: the Extended Credit Facility/Extended Credit Mechanism (USD 73 million still to be disbursed, including USD 35 million in June 2025), and the Resilience and Sustainability Facility (USD 161 million remaining, including USD 80 million in June). In line with its commitments to the Fund, the government is continuing its fiscal consolidation efforts, enabling a further reduction in the public deficit in 2025, reaching the ceiling of 3% of GDP set by the West African Economic and Monetary Union. The 2025 budget stands at CFAF 3,551 billion (EUR 5.3 billion), up 11% compared to 2024. Nearly 42% of spending is directed towards socially sensitive sectors such as urban and rural infrastructure, education, health, and other social programmes. Defence spending has increased significantly (118 billion CFA francs, or +18%) in response to the escalation of terrorist attacks in the north. At the same time, the government must increase revenues without hindering development. It is therefore maintaining its support for the private sector through VAT and customs duty exemptions on new equipment and vehicles imported by SMEs. At the same time, it is pursuing its 2024-2028 medium-term revenue strategy (SRMT), which aims to generate 0.5% of GDP in additional revenue each year by broadening the tax base (through the fight against informality and smuggling), improving taxpayer compliance, and digitisation. Public debt (73% of which is external) ratio will continue to trace an downward trajectory in 2025, below the 70% of GDP threshold set by the WAEMU, thanks to deficit reduction and strong growth.

The current account deficit is expected to narrow again in 2025 as the trade balance improves. Although the trade balance will remain in deficit due to strong domestic demand and the economy's lack of diversification, lower global oil and cereal prices are helping to reduce the import bill. At the same time, exports are being boosted by the expansion of the GDIZ and the port of Cotonou, which has coincided with increased cotton and textile production, as well as the recovery of transshipment revenues as relations with Niger normalise. The services deficit will persist due to training, consulting and engineering needs related to implementing infrastructure projects. The surplus in secondary income, generated by remittances from expatriates and project aid, offsets the primary income deficit caused by the repatriation of foreign corporate profits and debt interest payments. The current account deficit will be financed by FDI, multilateral loans - notably from the World Bank and the IMF -and Eurobond issues (27% of external debt in 2024), including the January 2025 issue (USD 500 million with a 16-year maturity and a 6.48% coupon in euros).

Growing Islamist terrorism in the north

President Patrice Talon was re-elected in 2021 and exercises tight control over institutions. In the January 2023 legislative elections, the two pro-government parties - the Union progressiste (UPR) and the Bloc républicain (BR) - won a large majority taking 81 of the 109 seats in the National Assembly. The elections took place under conditions that weakened the opposition (targeted arrests and violent repression). However, the President has stated that he will not seek a third term in 2026, in accordance with the Constitution.

Since January 2025, the north of the country has been facing a resurgence of deadly terrorist attacks by jihadist groups based in neighbouring Burkina Faso and Niger. The attacks have been facilitated by poor cooperation between the three countries. The withdrawal of Mali, Burkina Faso, and Niger -grouped together in the Alliance of Sahel States (AES) - from the Economic Community of West African States in January 2025 has weakened regional unity and cooperation. Benin's relations with AES countries will remain tense due to its close ties with France. In this regard, the full normalisation of economic and diplomatic relations with Niger has been slow to materialise despite the resumption of Nigerien oil exports via the pipeline connecting Agadem to the Beninese port of Sèmè-Kpodji. Although Benin reopened its border in May 2024 following the lifting of ECOWAS economic sanctions at the end of February 2024, Niger is keeping its border closed, citing the alleged presence of French military bases on Beninese soil. Recent terrorist attacks are clouding the short-term prospects for any détente.

Last updated:May 2025