经济研究
Burundi

Burundi

Population 9.6 million
GDP 325 US$
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Synthesis

major macro economic indicators

  2016 2017 2018 (e) 2019 (f)
GDP growth (%) -0.6 0.5 1.9 2.3
Inflation (yearly average, %) 5.5 16.1 10.3 11.4
Budget balance* (% GDP) -6.9 -4.5 -3.8 -4.4
Current account balance (% GDP) -11.5 -11.3 -10.1 -8.6
Public debt (% GDP) 48.4 51.7 58.4 63.5

 

(e): Estimate. (f): Forecast. *Grants included.

STRENGTHS

  • Natural resources (coffee, tea, gold)
  • Member of the East African Community (EAC)
  • World’s second largest nickel reserve with 6% of the total

WEAKNESSES

  • Entrenchment of the political crisis that began in 2015
  • Suspension of international aid following the political crisis
  • Border tensions with Rwanda
  • Poorly diversified economy; vulnerable to external shocks
  • Geographically isolated
  • Activity hampered by lack of infrastructure and limited access to electricity
  • Decrease in the labour force as the political crisis has forced people to flee the country

Risk assessment

Fragile and undiversified growth

Despite the ongoing political crisis, which has now spread to the social sphere, in 2019 Burundi is expected to experience its highest growth rate since 2014, the year before the difficulties began. With favourable weather conditions, higher agricultural yields will allow the primary sector to expand. The population, which is largely dependent (90% of jobs) on agriculture (30% of GDP), will then benefit from the resulting increase in incomes, generating a positive growth contribution from private consumption (83% of GDP), although this will be mitigated by high inflation. Exports of tea and coffee, the main outlets for agriculture, are expected to grow on the back of increased production, but at a slower pace than in 2018 as a result of softer world prices. Inflation in the price of imports, mainly manufactured products and oil, will push up the import bill, which could lead trade to contribute negatively to growth. Prompted by its determination to do a better job of harnessing Burundi’s mining potential, particularly in nickel, the government has taken positive measures, such as granting operating licences, to encourage private investment that will make up for the shortfall in public investment due to lack of resources. The positive effects observed in 2018 are expected to continue, albeit on a smaller scale, with investment growth of 5.3% in 2019 (down from 11.7% in 2018) forecast by the World Bank. However, political instability will continue to be a cause of concern for investors, and the strong growth in investment over 2018/19 is largely the result of a correction after two years of drastic decline after the onset of the political crisis in 2015.

Large public and current account deficits despite efforts

According to the Finance Act passed by Parliament in June 2018, the budget deficit is expected to decrease over 2018/19 compared with 2017. The increase in expenditure, particularly current expenditure, but also capital expenditure to a much smaller extent, is expected to be less significant than that of revenue, particularly tax revenue. As the country has no access to international capital markets, the government will finance itself through the central bank and on the domestic market, by issuing treasury bills and bonds (more than 80% of the total), which will fuel inflation. In 2018, 70% of public debt was domestic debt, comprising 40% from the central bank and the rest from commercial banks, while the other 30% was external debt, 77% of which was from multilateral partners.

The current account deficit is expected to continue to shrink in 2019, despite the decline in expatriate and official remittances. Structurally in deficit due to large imports of manufactured products (60% of the total) and oil (20%), the trade balance has deteriorated owing to depreciation of the currency and its impact on import prices. This deterioration will be contained by an uptick in mining and agricultural exports. The low level of external aid will be insufficient to finance the current account deficit. Increased FDI, thanks to government support, should also contribute to the financing while reducing the use of the central bank’s foreign exchange reserves (1.5 months of imports), which will continue to decline despite everything, accentuating the depreciation of the Burundian franc and the lack of liquidity in the economy.

Fading hopes of resolving the political and diplomatic crisis

President Pierre Nkurunziza’s announcement that he would not run for a third term in 2020 – a move that would not have been authorised by the constitution – failed to ease the tensions created when he announced his candidacy in 2015. The UN, which had called for talks between the government and the opposition in order to organise the 2020 elections in a transparent manner, had its Human Rights Mission expelled from Burundi at the end of 2018 at the request of the government. This will further complicate the country’s relations with the international community, which has already expressed its concerns about the fate of political opponents. The International Criminal Court (ICC), from which the country withdrew in 2017, is investigating alleged crimes against humanity, including murder and torture, and there have been media reports of torture camps for opponents of the regime. Burundi also refused the African Union’s request to send human rights observers and military experts to the country. Negotiations orchestrated by the East African Community (EAC) ended in failure after President Nkurunziza pulled out of the Arusha Summit, citing timing issues. Since the crisis began in April 2015, nearly half a million Burundians have fled the violence and economic stagnation in Burundi. The political crisis has undermined efforts to improve the business environment (168th in Doing Business 2019) and governance, which remains among the weakest in the world according to World Bank indicators, particularly in the areas of political stability (201st) and the rule of law (194th).

 

Last update : February 2019

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