- After a period of social and political unrest, the economy is expected to bounce back strongly in 2017 with growth of 8.4%, driven by attractive industries and public investment.
- The country needs to underpin this revival by improving its ability to absorb investment costs and control the threat of jihadist violence.
- Economic reforms under the 2011-20 plan for the industry, commerce and small producers sector have created more entrepreneurs, but new industrial sector firms are in attractive industries rather than agro-food.
After a drought-affected harvest and social and political problems slowed real GDP growth to 4% in 2014 and 2015, prospects are quite good for 2017, with the economy forecast to expand by 8.4% (up from 5.4% in 2016). The recovery is based on a vigorous mining sector (two new mines coming into production) and the start of major public investment in energy, hydro-agricultural facilities, roads and telecommunications under the 2016-20 PNDES national economic and social development plan adopted in July 2016. Continuing good prices for the country’s main commodity exports, gold and cotton, should also help the chances of a substantial revival of economic growth.
Inflation should be no more than 2.1% in 2017 thanks to 2016/17 harvest surpluses and reasonable prices of oil and other imports. Public finances remain tight due to the effects of social and political unrest and militant attacks. Reduced economic activity has meant less tax revenue as well as higher spending on security and meeting social demands. This in turn sharply cut investment spending, from 13.7% of GDP in 2013 to 8.6% in 2015, with a slight rise to 10.7% in 2016. The overall budget deficit (commitment basis) was 3.1% of GDP in 2016. The government plans similar strictness in 2017 and has extended for nine months the programme backed by the IMF’s Extended Credit Facility (ECF), with release of funds at its end. The budget deficit is forecast as 3% of GDP.
Entrepreneurs are thriving due to rigorous application of economic reforms as part of the 2011‑20 policy of the industry, commerce and small producers sector (Posica), including programmes to encourage entrepreneurs. An average 6 500 firms a year were set up between 2011 and 2015, nearly all very small and mainly in the services sector. New small firms in the industry sector are recent and especially in the extractive sector, with few in agro-food or manufacturing. Those classified as “other modern manufacturing industries” fell from 1.5% of GDP in 2011 to only 1.1% in 2016.
To advance industrialization, Posica 2011-20 has to create good conditions for industrial development and strengthen support infrastructure, especially energy, transport, technology and better training.