Burkina Faso is a poor, landlocked country with limited natural resources. Thanks to structural reforms, good policy management and strong support from international donors, however, it has become one the fastest growing non-oil economies in sub-Saharan Africa. Real GDP growth has averaged 6.1% since 2010, supported by the continued expansion in the mining industry (gold) and public investment.
Burkina Faso is a member of the West African and Monetary Union (WAEMU), which provides a solid buffer against balance of payment shocks as the French treasury guarantees the full convertibility of the CFA Franc against the euro at a fixed rate. This also helps to anchor monetary stability, with inflation rarely exceeding 3%. Reforms of the CFA Franc are ongoing but the fundamentals of the currency arrangement remain and the project of an enlarged monetary union with other West African countries is a long-term possibility. Furthermore, comfortable FX reserves pooled at the regional central bank, the BCEAO, continue to support the stability of the peg.
Looking ahead, economic growth is projected to remain strong. But risks are significant. In addition to the Covid-19 pandemic shock, the country has also to deal with deteriorating security. Massive external assistance from donors should help to alleviate short-term macroeconomic pressure. But persistent security threat may undermine already weak prospects for diversification.
