Benin: Strategic Climate Adaptation Essential for Sustainable Growth

The report highlights successful fiscal consolidation in 2023, with the budget deficit reducing to 4.1% of GDP from 5.5% in 2022 due to innovative tax measures and spending restraint.

The recently released Benin Economic Update Report emphasizes that sustainable and resilient economic growth in Benin hinges on strategic adaptations and significant investments in response to climate change. The report, titled "Adapting to Climate Change for Sustainable, Resilient Economic Growth," comprises two parts. The first part provides a detailed analysis of Benin's recent economic developments and projects a stable average annual growth rate of 6.2% from 2024 to 2026, largely fueled by investments and the expansion of the Glo-Djigbe industrial zone (GDIZ).

Despite challenges like the end of gasoline subsidies in Nigeria and the closure of the border with Niger, which led to supply chain disruptions and increased inflation, Benin managed to maintain an inflation rate of 2.8% in 2023, below the regional average of 3.7%. The report highlights successful fiscal consolidation in 2023, with the budget deficit reducing to 4.1% of GDP from 5.5% in 2022 due to innovative tax measures and spending restraint. This fiscal prudence is expected to further reduce the deficit to 2.7% of GDP by 2026.

Felix Oppong, a senior economist at the World Bank and co-author of the report, remarked, "Benin's economic resilience is bolstered by ongoing fiscal consolidation measures and a robust medium-term revenue mobilization strategy, ensuring the economy's capacity to withstand external shocks."

The second part of the report delves into the vulnerabilities of Benin's economy to climate change, projecting significant economic losses without additional adaptation efforts—up to an average annual loss of 19% of GDP by 2050. The analysis stresses that prioritizing adaptation and resilience could substantially reduce poverty, potentially lifting nearly half a million people out of poverty.

To combat the adverse effects of climate change, the report suggests several actions, particularly in the agricultural sector. These include adapting farming practices, restoring and protecting forests, and enhancing water resource management. "Decisive action in the agricultural sector is critical due to its significance to Benin's economy," stated Manuela Ravina Da Silva, a World Bank environmental specialist and co-author.

Further, the report underlines the necessity to strengthen the resilience of health and education services to protect human capital. It calls for improved infrastructure to mitigate urban flooding and maintain connectivity, essential for sustaining economic activities and market access.

Nestor Coffi, the World Bank country manager for Benin, highlighted the crucial role of private capital in climate financing, urging the private sector to leverage opportunities presented by climate adaptation measures for green growth.

The report ultimately advocates for strategic partnerships with the private sector to fund crucial climate investments, asserting that the long-term benefits significantly outweigh the costs. This approach is envisioned not only to enhance Benin's economic resilience but also to ensure sustainable development in the face of evolving global environmental challenges.