• It is 4.6% in April 2023
• The BCEAO maintains its key rates
• Favorable outlook for the area
L’inflation has finally come down. This was announced by Claude Kassi Brou, Chairman of the BCEAO Monetary Policy Committee, on June 7, 2023, on the occasion of the 2e meeting of its structure, for this year 2023.
“Inflation in the countries of the Union has indeed fallen. The inflation rate fell from 8.4% in September 2022 to 5.7% in March 2023 and 4.6% in April 2023. This decline was supported by the good results of the 2022/2023 agricultural campaign, the reduction in energy costs, as well as the monetary policy measures taken by the Central Bank and the efforts of the States to fight against the high cost of living”, can we read in the press release published by the BCEAO.
The main measure adopted by the BCEAO to counter inflation was the raising of the bank’s key rates. The objective is to reduce the money supply, to fight against inflation. Basically, making credit more expensive. If inflation is too high, due to greater demand than the amount of goods and services available, the central bank may raise rates to make credit more expensive. The economy will slow down, inflation expectations will normalize and inflation will return to lower levels. This policy, which began in June 2022, has begun to bear fruit. And the outlook is good. “Over the coming periods, inflation should continue to fall to return below 3%, in line with the objective set by the Central Bank”.
It was under these conditions that during his 2e meeting of the year, the Monetary Policy Committee decided to keep the main policy rate unchanged. This had been set at 3% since March 16, 2023. In the press release, at the end of the meeting, we also note that the interest rate on the marginal lending window is also maintained at 5%.
Over the coming months, the Monetary Policy Committee will analyze the trend in inflation and the financing conditions of the economies and, if necessary, take the appropriate measures to ensure monetary stability in the zone.
By way of outlook, the BCEAO states that “the good performance of activity in all sectors suggests, for the year 2023, robust growth projected at 6.3%, after 5.9% in 2022. “At the level of our external accounts, the actions taken by the Central Bank have made it possible to contain the pressures observed in 2022 and at the start of 2023. The level of reserves in April and May 2023 remains adequate to cover our imports of goods and services. Over the coming periods, the increase in exports, the mobilization of external resources by States from partners, as well as the measures taken by the Central Bank to improve the profile of the repatriation of export earnings should consolidate this trend”, affirmed Jean-Claude Kassi Brou, Chairman of the BCEAO Monetary Policy Committee, during his speech at the meeting.
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Medium-term macroeconomic forecasts
ADuring the meeting, the Committee reviewed the report on monetary policy in WAMU. This report, drawn up by BCEAO departments, provides a summary of recent developments in the international and internal environment, as well as the outlook.
According to the document that L’Economiste du Faso was able to consult, the macroeconomic projections in the Union remain generally favorable, despite the persistence of certain downside risk factors. For the year 2023, the Central Bank’s projections count on a 6.5% increase in the Union’s GDP, in real terms. Economic activity would be driven by the tertiary and secondary sectors. The increase in extractive production, following in particular the start-up of oil and gas production in Senegal towards the end of the year, should support the dynamics of the secondary sector. The consolidation of commercial activities and services, as well as the increase in agricultural production, due to the continued implementation, in most countries, of programs aimed at improving the yields of the main crops and food products would be beneficial for growth.
According to the GDP jobs analysis, economic expansion in 2023 would be driven by final consumption. The public investment rate would drop from 8.2% in 2022 to 7.7% in 2023. That of the private sector would stand at 18% in 2023, against 19.5% in 2022.
