Covid-19: Economic impacts on Togo and other WAEMU members (Study)

Economic governance

Thursday, 09 April 2020 12:12

Covid-19: Economic impacts on Togo and other WAEMU members (Study)

(Togo First) - While early forecasts for 2020 were relatively optimistic, everything has changed with the coronavirus pandemic all over the world. As a result, Africa and more specifically West Africa is forced to lower its expectations in terms of economic growth.

According to a recent study by Bloomfield Investment, it is said that growth in the WAEMU States - that includes Togo, Benin, Burkina Faso, Côte d’Ivoire, Senegal, Mali, Niger, and Guinea Bissau- could reduce by 50%.

The Togolese minister of finance, Sani Yaya, has recently aligned with the grim project saying: “Activity has slowed down, and the economic growth rate will surely be impacted. It could be reduced by half.”

Togo, it should be recalled, expected a growth rate of about 5.3% in 2020. However, given the actual context, the forecast was downscaled to between 2.1% and 2.5%. This breaks the good pace that the country had started in 2017.

Impact in WAEMU

According to the study’s authors, the WAEMU countries should be affected in four major areas: international trading, remittances, local economy, and public finances.

“Most countries in the area export mainly commodities,” and their main buyers are Europe (44.1%), Africa (21.6%), Asia (20.5%) and America (7.9%). Bloomfield predicts that the fall in demand will be felt on both sides.

Cotton: Togo a little less exposed than neighbors

In 2018, cotton made up 10% of Togo’s export making it the country’s second export product. Compared to Benin, it should thus be less impacted by the sharp drop in the prices of the crop. In 2018, cotton exports represented 56.9% of Benin’s overall exports and this exposes the nation to the price drop the most.

Let's recall that Togo had set to produce 200,000 t of cotton by 2022 - an objective that could be hampered in the current context.

Lower remittances

“Remittances to the WAEMU zone should fall,” according to Bloomfield. Given their size, this could indirectly increase the impact of the Covid-19 on the zone’s countries.

For example in 2018, the transfers from the diaspora represented respectively 7.7%, 10% and 5.5% of the GDPs of Togo, Senegal, and Mali.

Between 2007-2017, Togo captured 9.4% of remittances coming from the European Union (which is near recession at the moment), coming ahead of Côte d’Ivoire (6.6%), but far behind Mali (19.7%) and Senegal (47.6%).

Lower public revenues vs. external debt

As economic activity slows down, a fall in budget revenues (tax and customs) will undoubtedly follow whilst the debt burden is going to be felt more than ever.

Togo, in this regard, is one of the countries that are most exposed to the resulting pressure according to the study; as 65% of public resources, excluding grants, are used to service its debt (IMF estimates). Besides Togo, the two other WAEMU States that are most exposed are Burkina Faso (42.9%) and Benin (46.2%).

Let it be recalled that it is with this concern in mind that the World Bank and IMF recently asked official bilateral creditors to suspend debt payment for the most vulnerable countries.

REFORMS OVERVIEW

STARTING A BUSINESS (more info)

At the fifteenth position, worldwide, and first in Africa, under the Starting a Business index of the 2020 Doing Business ranking, Togo sustains its reformative dynamics with more reforms….

ENFORCING CONTRACTS (more info)

Compared to some years ago when it was one of the lowest rankers under the Doing Business’ Enforcing Contracts indicator, Togo, leveraging many efforts to improve its business climate, was able to jump significantly on the index in the recent years... .

CONTRACT EXECUTION (more info)

Creation of special chambers of commerce for small debts • Creation of chambers of commerce at the Court of Appeal • Civil and commercial cases now handled by distinct clerks • Establishment of commercial courts in Lomé and Kara • Lawyers and bailiffs now have access to the FORSETI COMMERCIAL platform • A maximum period of 100 days was fixed to settle a commercial dispute .

TRADING ACROSS BORDERS (more info)

In comparison to previous years,Togo has significantly improved its ranking under the“Trading across borders” indicator by adopting multiple reforms that focus mainly on the digitization and reduction in delays, for import and export procedures related to import and export.

In comparison to previous years, Togo has significantly improved its ranking on the “Trading across borders” index by adopting multiple reforms that focus mainly on the digitalization and reduction in delays, for import and export procedures related to import and export.

CONSTRUCTION PERMIT (more info)

After moving from the 133rd to 127th place under the 2020 Doing Business’ construction permit index, Togo intends to reiterate this feat in the coming edition of the global ranking. To this end, it has introduced this year multiple reforms.

GETTING ELECTRICITY (more info)

Over the past two years, Togo’s ranking under the Doing Business’ Getting electricity and water indicator has increased consistently. Owing this performance to multiple reforms aimed at making it easier for businesses to access power and water, Lomé plans to introduce even more reforms this year to keep up its improvements.

REGISTERING A PROPERTY (more info)

Out of all the 'Doing Business’ indicators, Property Registration is where Togo has improved the most since 2018. Indeed, after spending years in the lowest part of this ranking, the country now seeks to beat Rwanda which is the best performer on this index in Africa. To do so, Lomé has been introducing many reforms, with the latest batch implemented this year.

PUBLIC PROCUREMENT (more info)

From professionalization to digitization, through legislative regulations, Togo’s public procurement framework is constantly being modernized. Several reforms have been implemented to improve the sector much to the benefit of the private sector, which is the focus of the National Development Plan.

PAYING TAXES AND DUTIES (more info)

To improve its business environment, Togo introduced some important reforms related to the payment of tax and duties. From the replacement of some taxes to the cancellation of others through exemptions, the country has only one objective: offer the most attractive tax framework to investors and economic operators. To achieve this, the authorities relied on digitization.