Economic studies
Togo

Togo

Population 7.8 million
GDP per capita 611 US$
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2016 2017 2018 (e) 2019 (f)
GDP growth (%) 5.1 4.4 4.5 4.8
Inflation (yearly average, %) 0.9 -0.8 0.4 1.2
Budget balance (% GDP) -9.6 -0.3 -3.9 -0.4
Current account balance (% GDP) -9.0 -7.3 -7.1 -6.6
Public debt (% GDP) 81.6 76.0 73.4 66.0

(e): Estimate. (f): Forecast.

STRENGTHS

  • Mineral (phosphate, limestone and clay transformed into clinker) and agricultural (coffee, cocoa, cotton) resources
  • With the only deepwater port in West Africa (Lomé), Togo has the potential to become a regional hub
  • Public and private investment in infrastructure
  • Structural reforms underway (public finances, banking system, phosphate and cotton sectors)
  • WAEMU and ECOWAS member

WEAKNESSES

  • Heightened sociopolitical tensions
  • Difficult business climate
  • High levels of poverty and unemployment
  • Inadequate education and public health infrastructure

RISK ASSESSMENT

The NDP will boost growth through investment

The launch of the 2018-2022 National Development Plan (NDP) – whose primary objective is to transform the country into a regional hub for logistics, finance, and tourism hub – will make the tertiary sector the main contributor to growth in 2019, particularly through the development of logistics and transport via improvements to the port of Lomé, and air transport.

In addition to being targeted under the NDP’s second action area (which calls for the creation of agri-food hubs), the agricultural sector is also set to benefit from the impact of the National Programme for Agricultural Investment and Food Security (Programme national d’investissement agricole et de sécurité alimentaire, PNIASA) carried out between 2012 and 2015, with an increase in yields, particularly in cotton and cocoa production. These productivity gains – along with the development of extractive activities, which are also covered by the second action area of the NDP – will contribute to the growth of the primary sector (30% of GDP) and thus of the wider economy.

The social component of the NDP (third action area) will be supported from 2019 by public expenditure, with 45% of the budget earmarked for fighting poverty and promoting inclusion, with the ultimate objective of creating 500,000 jobs. These measures, combined with low inflation and increased yields in the agricultural sector (which accounts for 60% of employment), should spur brisk growth in private consumption (nearly 80% of GDP). Although significant at 14% of GDP, public spending is expected to correct and decrease slightly after an expensive 2018 due to the holding of parliamentary elections. Overall investment is expected to make a significant contribution to growth in 2019, due to the launch of NDP-related projects, two thirds of which will be private and one third public. Past investment in the agricultural and extractive sectors, as well as the expected recovery in some trading partners, notably Nigeria, should allow export growth to exceed import growth, which will remain more contained, generating a net positive contribution to growth from the trade balance.

 

Consolidation of public and current accounts

On the recommendations of the IMF, which granted the country a USD 241.5 million Extended Credit Facility in 2017, the government will step up its fiscal efforts in 2019. The government deficit is expected to narrow drastically in 2019, after worsening significantly in 2018 owing to the organisation of parliamentary elections and the related indirect expenditure. According to the 2019 finance bill, tax revenues are going to increase by 8.6% thanks to tighter customs controls and measures to stop tax evasion, non-tax revenues will fall by 5.2%, and expenditure will also decrease. The budget deficit of XOF 13 billion is expected to be financed by cash resources that the government defines as asset transfers and deposits on correspondent accounts. Debt, continuing its downward trajectory, could meet WAEMU convergence criteria (70% of GDP) in 2019.

The reduction in the structural trade deficit (about 20% of GDP), through faster export growth (thanks to the extractive and agricultural sectors) relative to imports, should lead to a reduction in the current account deficit. Surpluses in services, income and, above all, transfers (6.7% of GDP) thanks to expatriate remittances, will offer only a partial offset. Foreign investment (more than 3% of GDP, net), linked to the launch of the NDP, is expected to be the main counterpart to this current account deficit.

 

Sociopolitical instability but continuity of power

The results of the December 2018 parliamentary elections were mixed for President Faure Gnassingbé, who has been in power since 2005 after succeeding his father Eyadéma Gnassingbé (president from 1967 to 2005). Despite the absence of the opposition, who refused to participate in the elections, his party lost 3 seats, which could complicate the change of constitution, as requested by President Gnassingbé. The elections saw the resurgence of social unrest, which had previously formed in the summer of 2017 before being quickly and violently repressed. The government's efforts to reduce debt, consolidate public accounts, and develop the country's attractiveness have achieved visible results, with Togo coming in the top ten most reforming countries for the business climate, and offering a more favourable environment than the regional average according to the Doing Business 2019 rankings. Nevertheless, these efforts still seem insufficient, considering that the country is just 137th in the world according to the Doing Business 2019 rankings and its governance gets a poor rating from the World Bank. As a member of various UN and AU peacekeeping missions, Togo also wishes to play a role in improving security on the continent.

 

Last update : February 2019

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