WAEMU: Firm growth at 6.8%, an improvement in the public deficit, but fragilities persist

(Togo First) – Despite the negative shocks that have recently slowed down economic activity, WAEMU member countries' regional growth has remained above the 6% mark in 2017 for the 6th year in a row. Exactly 6.6% in 2017, an increase of 1 basis point compared to 2016.

The GDP growth rate of the 8 WAEMU countries is keeping pace in a still difficult international environment. This evolution is mainly supported by the good performance of commercial activities and transport and telecommunication services. For the year 2018, the economic growth rate is expected at 6.8%. However, the main challenge is to achieve the fiscal adjustment necessary to reduce the national deficits that are expected to reach 3% in 2019, in line with the convergence criterion.

The budget deficit should improve

The significant financing needs observed over the last few years have led to a rapid increase in the Union's debt ratio, which stood at 44.1% in 2017, up more than 12 percentage points. in five years. This pressure has aggravated the Union's budget deficits. However, the analysis of the implementation of the budgets of the Member States of the Union, allowed the Council of Finance Ministers, meeting at its second ordinary session of the year, June 29, 2018 in Dakar, to project a improvement of the budget deficit. From 4.2% of GDP in 2017, it is expected at 3.8% this year.

Thus, to consolidate the budgetary consolidation effort towards the Community norm of 3% of GDP in 2019, the Council of Ministers recommends, in particular, strengthening the capacity to mobilize tax revenue and improving the efficiency of public expenditure in the Union. The pursuit of the investments which are essential for the development of the economies of the Member States of the Union, particularly in the field of infrastructure, should primarily be carried out through greater mobilization of tax revenue, in order to preserve the sustainability of public finances, the Council has recommended.

Modest price increase

With regard to price developments in the Union, the Council notes a moderate price increase, with an average annual inflation rate of 0.8% in 2017 against 0.3% in 2016. In the first quarter of 2018, inflation reached 0.9%, "despite the tensions observed on the grain markets in certain EU Member States".

Convergence criteria: three countries on good momentum

Examining the state of convergence, the Council of Ministers welcomed the results obtained in 2017, the year in which 3 states members met all of the first-order convergence criteria, while in 2016, no state had met the key criterion, relating to the overall fiscal balance.

Minimizing the risks associated with the Public Private Partnership (PPP)

If to favor large investments, UEMOA has set the course for the Public-Private Partnership since 2012, it is clear that this precious instrument to start structuring projects, able to propel economic dynamics, seems to be delivered to unprecedented puzzles

It is with a view to overcoming these biases that the Council adopted a recommendation on the economic policy guidelines for the Member States under the year 2019. The objective of this recommendation is to minimize the risks associated with the Public Private Partnership (PPP). The recommendation aims at taking into account, by the Member States of the Union, this financing in the analyzes of the viability of the public debt.

Fiacre E. Kakpo