On 1 March 2022, the World Bank published a new Economic Memorandum of Benin. Entitled “Accelerating growth momentum and creating better jobs”, the report identifies the main drivers and limitations related to the current growth model.
In 2020, Benin officially changed from a low-income country to a lower-middle-income one. But much remains to be done to solidify this position. Atou Seck, World Bank Operations Manager for Benin, believes that Benin’s current economic model deserves to be supported in depth, with robust structural reforms to produce growth that generates labour productivity and quality jobs. According to the new report, it suggests ways to strengthen the economic dynamism launched in recent years in Benin. Benin’s Economic Memorandum aims to support Benin’s policymakers in their reform efforts, and to enrich the debate on the country’s socio-economic development. To accelerate growth momentum and create better jobs, the study recommends strong policy options along three lines of analysis. These include the demographic transition, strengthening transport infrastructure and services, and economic diversification. For Daniel Benitez, Senior Transport Economist and one of the authors of the report, “by improving transport infrastructure and services to better connect people and markets, reduce economic distance, and create agglomeration economies, the country will be able to become more competitive in the region.” He argues that this goes hand in hand with the diversification of exports, the modernization of informal transit trade and the strengthening of the ecosystem required for the development of a more competitive export sector.
Building on the demographic transition
Benin, one of the region’s rising economies, would benefit from reducing gender inequalities, strengthening human capital and improving the quality of the labour market, in order to reap the economic benefits of the demographic transition. This is what the World Bank experts note in the new Benin Economic Memorandum. This report reveals, among other things, that “to ensure the structural transformation of its economy, Benin would benefit from investing in new growth drivers that could increase labour productivity and create quality jobs for its workforce, especially for young people and women”. For Nathalie Picarelli, an Economist at the World Bank and the main editor of the report, the Beninese economy must be able to maintain the momentum of successful growth in recent years. This will allow the country to continue on the path of double-digit growth and solidify as a middle-income economy. “Deepening human capital development reforms, supporting infrastructure and services, and integrating the economy more effectively into global trade are some of the ways forward,” she said. Indeed, the report analyses the country’s economic growth patterns. It provides answers to questions such as: How can Benin capture the growth dividends of its demographic transition? How can better transport infrastructure and services fuel growth and economic transformation? Can trade enhance private sector competitiveness and economic diversification?
Although economic growth has increased to an average of 5.1 per cent per annum over the past decade, positioning the country as one of the region’s rising economies, it has not translated into a significant increase in labour productivity and remains volatile. Moreover, this strong growth has not led to a sufficient increase in per capita income when analysed over the past decade. Indeed, the report notes that, while the country’s real per capita income has increased, closing the gap with the regional average, 2.2% between 2011 and 2019, it remains insufficient to solidify gains and climb the ranks towards a middle-income economy of the upper group.