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- GDP (PPP):
- $15.6 billion
- 3.8% growth
- 3.5% 5-year compound annual growth
- $1,667 per capita
- Inflation (CPI):
- FDI Inflow:
Benin’s economic freedom score is 57.1, making its economy the 113th freest in the 2014 Index. Its overall score is 0.5 point worse than last year due to score declines in monetary freedom and fiscal freedom that outweigh a combined gain from business freedom, trade freedom, and labor freedom. Benin is ranked 18th out of 46 countries in the Sub-Saharan Africa region, and its overall score is higher than the regional average.
Over the 20-year history of the Index, Benin’s progress toward greater economic freedom has been patchy and modest. The overall score improvement has been merely 2.6 points, with hard-won gains in trade freedom, investment freedom, and monetary freedom offset by deteriorations in seven of the 10 economic freedoms including property rights, freedom from corruption, and business freedom. Benin had advanced to the status of “moderately free” during the late 1990s but since 2001 has fallen back to the ranks of the “mostly unfree.”
The lack of progress in advancing economic freedom weakens Benin’s prospects for lasting economic development. In the absence of a dynamic private sector, economic expansion remains fragile, and the poor quality of physical and legal infrastructure, impaired by the government’s inefficiency in delivering public goods, exacerbates the problems.
President Mathieu Kérékou, who ruled for almost 20 years after a military coup, stepped down following a democratic transition in the early 1990s and later served two five-year elected terms. Current President Thomas Boni Yayi was elected in 2006 and re-elected for another five-year term in 2011. Police foiled a coup against Yayi in March 2013, arresting a cabinet member involved in the plot. In January 2012, Yayi was elected chairman of the African Union. Benin remains underdeveloped and dependent on subsistence agriculture. Cotton accounts for over 40 percent of foreign exchange earnings, 17 percent of exports, and about 7 percent of GDP. Piracy has increased off the coast, with reports of 20 incidents of oil tanker hijacking in 2011.
The government passed an anti-corruption law in 2011, but corruption remains a problem in the customs service, government procurement, and the judicial system. There is extensive smuggling of subsidized and adulterated gasoline from neighboring Nigeria. There are no separate commercial courts, and backlogs of civil cases cause long delays. In 2013, a law was passed to facilitate land investment for development.
Benin’s top individual income tax rate has risen to 45 percent. The top corporate tax rate is 30 percent (up to 45 percent for oil companies). The overall tax burden has fallen to 15.5 percent. A narrow tax base and large public wages continue to put pressure on public finances. Public expenditures are 21.5 percent of domestic output, and public debt hovers around 32 percent of GDP.
Launching a business still costs more than the level of average annual income, and the minimum capital required exceeds twice the income level. Getting all of the necessary permits takes more than 200 days. Despite flexible employment regulations, a formal labor market has not fully developed. The government subsidizes the production of cotton, and subsidized gasoline and diesel fuel are smuggled illegally from Nigeria.
Benin has a 15 percent average tariff rate. The legal and regulatory systems can hinder international trade and investment. The financial system remains underdeveloped. Banks have continued to increase their domestic assets, and there are many microfinance institutions. Nonetheless, overall access to credit remains limited.