Togo: S&P expects a rapid economic recovery which is to start slowly in the second half of the year

Economic governance

Tuesday, 28 April 2020 15:20

Togo: S&P expects a rapid economic recovery which is to start slowly in the second half of the year

(Togo First) - US rating agency Standard & Poor’s maintained its ‘B’ long-term and short-term sovereign credit ratings on Togo. “The significantly adverse effects of the COVID-19 pandemic will take a toll on the Togolese economy and public finances in 2020. Nevertheless, the country's solid economic performance and the fiscal consolidation over past years should contribute to a rapid economic recovery from next year,” the agency said in its latest update for the country released on April 24.

Uncertainties

S&P hence expects a slow restart of economic activity starting from the second half of this year. Just like the IMF, the agency forecasts a 1% growth rate for the rest of 2020 but unlike the Bretton Woods institution it emphasizes that “our economic projections are uncertain, however, since they depend on how the pandemic evolves.” S&P attributes this uncertainty to the large informal sector, “unaccounted for in official data.” This sector, experts say, makes it very difficult to estimate the pandemic’s economic impact.

Regarding the budget deficit, it should dip to 4%, despite international actors mobilizing funds to help Togo cope with new spending spurred by the Covid-19 and losses of tax earnings. This is quite unfortunate given all the efforts the country had made to improve its public finances in recent years.

“The stable outlook on Togo reflects our view that the adverse economic and budgetary impact of the COVID-19 pandemic will be contained without lasting and structural damage to credit metrics,” S&P says adding that “once the impact of COVID-19 is contained, we expect the authorities to continue with further structural economic and budgetary reforms, leading to improved economic and budgetary performance.”

Socio-political risks

In addition to its uncertainties, S&P, based on recent facts (mid-2017) and the regional context, talks of socio-political and security risks in the short and long term. These “could be a disincentive for private investors and make foreign investment flows more uncertain.” Quite a dire premonition for the country which depends on these investors to provide 65% of the funds needed for its national development plan (PND).

Here again, the report’s authors believe that once the pandemic is contained, investments in export sectors (phosphate and cotton mainly) and infrastructures, in line with the PND, should restart.

WAEMU, a fortunate protection

A good point for Togo, according to S&P, is that it is part of the West African Economic and Monetary Union (WAEMU). Indeed, the latter is for the country a safety net protecting it with the regional stock market, solid reserves, and the possibility to use part of the cash liquidity it (Togo) has at the BCEAO to plug the budgetary deficit. However, this might not be possible if pressure on the zone’s foreign reserves rises, especially considering that the imbalance between import and export bills keeps growing.

Fiacre E. Kakpo

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.