Over-reliance on the primary sector causes exposure to exogenous factors

As a landlocked country, transport costs are a significant constraint on export growth and economic development. Although progress is evident and GDP growth is relatively high, the economic structure is weak and large deficits are recorded in the fiscal and the current accounts. Around 80% of the population is engaged in (mainly subsistence) agriculture, which is vulnerable to sharp variations in rainfall. The small industrial sector remains dominated by largely unprofitable government-controlled corporations. Moreover, the economy is over-dependent on the export of cotton and gold. As a result, the economy is highly exposed to exogenous factors, including weather, plant diseases and pests and global prices of agricultural products and precious metals.

GDP growth remains relatively strong, although currently below the long-term annual average

Real GDP growth in the ten-year period to end-2015 was an annual average +5.8%. EH forecasts growth will dip to +4% in 2016 (+4.5% in 2015) before recovering to +5.5% in 2017, reflecting the continuation of weak global commodity markets in the former and increased mining activity in the latter as new gold mines and development of existing mines boosts output and earnings. Oil prices are forecast to remain relatively weak and this will also encourage economic activity, given that 18% of import costs derive from that commodity. The growth outlook has considerable downside risks associated with uncertain domestic stability and also with adverse regional (Sahelian as well as West African) factors.

External debt is again increasing

External debt stock ratios and servicing obligations were markedly reduced through debt relief, with significant write-downs in 2002 (Highly Indebted Poor Country initiative) and in 2006 (Multilateral Debt Relief initiative). The external debt/GDP ratio declined to a more comfortable 19% in 2008, compared with over 54% in 2000. However, external debt is increasing again (28% of GDP and over 120% of export earnings in 2016) and servicing of such obligations will limit the accumulation of FX reserves. For now, FX reserves of around USD1.5bn provide import cover of over four months, compared with an international benchmark of three months. 

Business The business environment is challenging…

Burkina Faso ranks 143 out of 189 economies in the World Bank's Doing Business 2016 survey, below Tanzania, Malawi and Côte d’Ivoire but above Ethiopia, Sierra Leone and Togo. Infrastructure deficiencies (landlocked country), a weak legal system, perceptions of widespread corruption and low literacy rates are obstacles to private investment. The banking sector remains concentrated, with limited competition, and is over-exposed to a few large borrowers, including in the cotton industry. 

…but much will depend on domestic political stability and regional security

Roch Marc Christian Kaboré won presidential elections in December 2015. The polls were relatively fair and the transition provides scope to enhance stability after the forced resignation in October 2014 of former -president Blaise Compaoré whose plan to change the two-term presidential constitutional limit caused a civil uprising, as well as a brief military coup in September 2015. Kaboré was elected partly on expectations that policies enacted by his regime will be more pro-business and that a new mining code will retain existing investments in that sector. However, border and internal security will remain the key challenges, given uncertain regional stability and a still fragile domestic political evolution.