Sustained growth through investment
Economic growth is expected to maintain a healthy pace. Consumption should be driven by a slowdown in inflation, which stood at 2.9% in December 2024 (annual average) owing to lower food prices and continued energy price subsidies. However, price levels will remain subject to bullish risks linked to climatic conditions as well as regional security and geopolitical tensions.
Public and private investment will remain buoyant, particularly in the special economic zones. The country is continuing to diversify, through the local development of its primary production, as set out in the five-year “Togo 2025” roadmap. The latter calls for accelerated local processing of phosphates and agricultural and forestry products, notably on the Plateforme industrielle d'Adétikopé (PIA). In addition, three financing agreements for a total of USD 298 million were signed between Togo and the World Bank in July 2024. They aim to improve access to electricity, enhance the delivery of public services and promote social cohesion. Similarly, the rehabilitation of the Lomé-Cotonou Road, as part of the Abidjan-Lagos Corridor project, will encourage development in the regional area by opening up production zones and facilitating traffic flows. Despite the simplification of the regulatory framework, particularly in the special economic zones, persistent difficulties, notably in terms of access to financing, are slowing down diversification.
Industry (21.3% of GDP in 2023) has been driven by phosphate and rising electricity production. The agri-food and cement sectors also play a large role. Mining and textiles are also set for further growth. Value-added in services (55.5% of GDP) will continue to expand. Agriculture (20% of GDP) also performed better thanks to favorable weather conditions. Although still behind the 2018-2019 peak, a rebound in cotton production has been observed, but may not continue. Agricultural transformation aimed at improving productivity is under way, as illustrated by the partnership with Germany for cotton, which should create new export opportunities and reduce poverty levels among the population. In this sector, the working population (60% of the total) is still employed in low-productivity, mainly informal jobs. The same applies to services.
Fiscal consolidation well under way
Togo was able to mitigate the effects of the pandemic and the rise in world food and fuel prices, but at the cost of increasing its budget deficit and debt load. As a result, the government has embarked on a period of fiscal consolidation. In March 2024, Togo signed a 3.5-year, USD 390 million Extended Credit Facility (ECF) with the IMF. In exchange, Togo must increase its revenues, the target being 0.5% of GDP per year to reach 16%, and reduce its budget deficit to bring it closer to 3% of GDP. To achieve this, the government will continue with reforms aimed at broadening the tax base via digitisation, revising excise rates and bringing a halt to exemptions related to the coronavirus pandemic. It will also streamline tax collection and create a single social register and a biometric identification platform. On the expenditure side, the public wage bill will be reduced and certain subsidies abolished. As demonstrated by the first review of the programme in December 2024, Togo is well on track. Improved tax collection will boost public investment and social protection during the second phase. Last, security-related expenditure will continue to rise.
Public debt is 60% domestic and mostly consists of government securities issued on the sub-regional market. The cost of servicing this debt is much higher than the external portion’s. Total outstanding debt maturing in 2024 is expected to represent 9.75% of GDP, including 7.42% for domestic debt. The country's medium-term debt strategy calls for a lengthening of the average maturity by balancing the domestic and external shares in 2026, with increased recourse to concessional loans. The IMF considers that the risk of external debt overhang will continue to be moderate, while the risk of overall debt overhang will be high due to the limited reserves, which stood at just 1.09 months of imports in 2024.
Despite the slight decline in the trade deficit due to lower imported fuel prices, and the increase in the surplus on services linked to transit trade and tourism, the current account deficit increased in 2024 due to the return of remittances to their pre-pandemic level. That said, it should narrow in 2025, on back of fiscal rebalancing, and increased exports of goods and services.
Regime change and continuing security risk
On 6 May 2024, following a unanimous vote by the country's members of parliament, Togo passed a constitutional amendment law that shifted the country from a presidential to a parliamentary system. The President of the Republic will henceforth be elected by the MPs and his executive powers will be substantially reduced. Power will be vested in the hands of a President of the Council of Ministers appointed from the party which holds the parliamentary majority and who will be subject to an unlimited number of terms. The party of the current president, Faure Gnassingbé, won the last legislative elections in April 2024 with 108 out of 113 MPs. This system should enable him to remain in power for a prolonged period. In power since 2005, Faure Gnassingbé had already amended the Constitution in 2019 to allow him to run for two more terms until 2030. He has been criticised by the opposition for his ambition to remain in power, but they have limited means of action at their disposal. The regime will continue to be supported by the army and by positive results from the economy and in development. On 2 February 2025, one of the final stages in the country's transition to the Fifth Republic will take place, with the election of the inaugural Senate. It will be made up of 61 members: 41 elected by indirect universal suffrage and 20 appointed by President Faure Gnassingbé himself.
In terms of security, the north of the country is still subject to terrorist incursions due to its porous border with Burkina Faso. The state of emergency in place in the Savanes region since 2022 will be maintained in 2025. Military spending will continue to rise to address the threat, with the government projecting to disburse USD 227 million in 2025, up from USD 100 million in 2018. A threat also persists in the Gulf of Guinea, where piracy is rife.
The country should further its ties with the juntas of Mali, Niger and Burkina Faso as it is equally as interested in the flow of goods between Lomé and the Sahelian hinterland, which is hampered by jihadist attacks. On that score, President Faure Gnassingbé has taken a more favorable stance towards these governments than the other ECOWAS (Economic Community of West African States) countries. For this reason, he has been designated co-facilitator of trade between the Community and the three countries. The country has benefited from a redirection of trade flows from Niger, which is set to continue due to friction between Benin and Niger and the deteriorating security situation on the borders of these two countries. Togo will also continue its privileged relationship with China, its main supplier. In September 2024, this relationship was consecrated as a comprehensive strategic partnership, the highest level in the Chinese scale of cooperative relations. The country will also work to diversify its international partnerships as it has already done with Turkey and India. The country's economic performance and its ability to implement economic reforms, highlighted by the IMF's commitment, will continue to sustain positive sentiment of international investors and donors towards it.